Refinery deal above board, Murungi tells Parliament

July 16, 2008 12:00 am

, NAIROBI, July 16 – Energy Minister Kiraitu Murungi distanced his Ministry on Wednesday from the delay in the sale of 50 percent of the Kenya Petroleum Oil Refineries (KPRL).

Kiraitu told Parliament that Treasury had stalled the sale of the refinery to an Indian firm and was instead pushing for a Libyan company to buy part of the shares.

The government owns 50 percent of the refinery while Shell, BP and Chevron own the other stake, which they wanted to dispose of. Shell owns 17.1 percent, BP 17.1 percent and Chevron Global Energy owns 15.8 percent.

Kiraitu said Essar of India was selected to buy the 50 percent for Sh674 million.
Libya Oil, which was among the applicants, however refused to deal with Wood Mckenzie, a firm that was short listing a suitable buyer, and wanted to deal directly with the government.

“It should be noted that Tamoil refused to deal with Wood Mckenzie since it wanted to have a direct bilateral arrangement with the government on its equity participation in the refinery upgrade,” he said.

Wood Mckenzie was appointed in mid 2007 by the three shareholders to market their 50 percent equity to the highest bidder.

Kiraitu, who was delivering a ministerial statement requested by Budalangi MP Ababu Namwamba, denied any corrupt deals or acts in self interest, emphasising that the government was committed to upgrading the project and protecting the Kenyan interest.

“The assumptions made by Namwamba are incorrect. Essar Energy was selected competitively and in a transparent manner by Wood Mckenzie and the transaction consultants for the three private shareholders, to buy their 50 percent for Sh674 million,” said Kiraitu.

In his request, Namwamba had wanted to know the status of the refinery upgrade programme in Mombasa and the foreign ownership of KPRL.

He alleged that there were massive irregularities, and further expressed that there was an intention by the Energy and Finance Ministries to privatise KPRL secretly.

“What is the justification for the escalation of the projected upgrade budget from the initial Sh20 billion to Sh28 billion especially in view of the fact that Essar Company of India has made an offer of Sh26 billion?” he asked.

Kiraitu said he was not aware of the estimated cost having risen and Essar had not made any offer to upgrade the refinery at such a cost.

KPRL processes approximately 4 million metric tonnes of heavy crude oils every year.


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