Big pipeline equals less trucks

October 28, 2008
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, NAIROBI, October 28 – The number of petroleum trucks ferrying oil products from Mombasa by road are set to reduce significantly following the completion of the capacity enhancement project of the Mombasa-Nairobi pipeline.

Energy Permanent Secretary (PS) Patrick Nyoike told Capital Business that the project, which involved the construction of four pump stations along the Mombasa-Nairobi pipeline and which will see the product flow-rate capacity doubled to 880,000 litres per hour, can start operations as early as next Friday.

“There will be no need for anybody to go to Mombasa to pick oil products. We will also be able to create space at the Kipevu Oil Storage facility and thus anybody wanting storage space will be granted,” he explained.

Mr Nyoike said that with the completion of the project, consumers could also expect a marginal drop in pump prices because the road tariffs charged on the tankers would be reduced significantly.

“All the pump prices you have been seeing are set on the basis of low tariffs, which are much higher than pipeline rates so it is likely to see a slight drop in the prices,” the PS added.

The official commissioning of the pipeline would however be done later as ministry officials were still trying to reach either President Mwai Kibaki or the Prime Minister to be their chief guest.

The upgrading of the pipeline, which was constructed in the 1970s, was necessitated by rising demand for petroleum products in the country and in the East African region, which had strained it and sometimes resulted in a shortage of fuel in various parts of the country.

However, allegations that the project was over-priced by 11.4 percent to Sh4.3 billion and the subsequent launch of investigations into the same are threatening to overshadow the benefits.

Kenya Pipeline Company (KPC) Managing Director George Okungu told a press briefing on Tuesday that he was ready to resign if the probe found him guilty of any wrongdoing.

He instead blamed the project’s contractors including the Chinese Petroleum Pipeline Engineering Corporation (CPPEC), whom he said failed to advise the board accordingly when they revised the figures.

Mr Nyoike told reporters that according to the preliminary design, the project, which also included the construction of control buildings, staff houses, fire-fighting facilities, power and water supply systems among other civil works was estimated to cost Sh262.6 million.

But upon a detailed engineering design, which took into account the operational and environmental concerns, the cost was reviewed to Sh655.18 million. This included other charges such as an increase in the cost of engineering services, an erection of high voltage lines and associated equipment from Sh12.5 million to Sh145.4 million.

The PS said that the KPC board had sought Energy Minister Kiraitu Murungi’s guidance on policy, given the changed scope of works over the original contract, who advised that the cost overruns be financed internally through the reallocation of funds within the current approved budget.

Since there had been lapses in the project’s implementation, Mr Murungi also recommended that the Board Tender Oversight Committee undertake investigations immediately the project was commissioned, to find out whether the right procedures were followed.

Meanwhile, Mr Nyoike explained that together with their Finance counterparts, they were still deliberating on how to workout the levels of tax reduction on electricity tariffs.

He revealed that they were likely to conclude the discussions by Friday this week.

“We had the infrastructure bond conference and that is why we were not able to meet and complete the discussions. We hope to be through in the next three days,” he said.

Early this month, President Kibaki directed the two ministries to lower the tariffs to reduce the burden of high energy costs on consumers and manufacturers.

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