Why Libyans lost Kenya refinery deal

April 2, 2009
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, NAIROBI, Kenya, Apr 2–  It is now emerging that Libya-owned Tamoil SA lost its bid for the Kenya Petroleum Refineries Limited after it pushed to take some of the government’s shareholding and acquire a majority stake.

Tamoil had initially been locked out of the deal after India’s Essar Oil and Gas won the bid to buy out three oil marketers that held a 50 percent stake in the refinery. But the government, which hold pre-emptive rights, had delayed the process in an attempt to have its preferred partner (Tamoil) enter into a partnership with Essar.

Energy Permanent Secretary Patrick Nyoike said the Libyans asked for a bigger piece of the cake, which would have meant the government shedding off part of its 50 percent shareholding.

“The disposal of any public asset has to go through the tender process and so if a partner comes on board and tells you, you have to reduce your equity and give it to them it is impossible within the law.”

Mr Nyoike told the press that negotiations between the government and Essar Oil and Gas on the partnership agreement would now go ahead and should be complete within a month’s time.
“We are finishing on some finer details this week and once this is done we will have a board of eight, with four from the government and four from Essar,”he said.

Essar Oil and Gas Ltd won the bid for the 50 percent combined shares when the Changamwe-based factory was put up for sale about two years ago.

The Indian firm had purchased the 50 percent stake from three oil majors BP and Shell Petroleum Company (each with 17.1 percent) and Chevron Africa Oil Holdings Ltd (15.8 percent).

Meanwhile Kengen has signed a Sh2.1 billion loan agreement with the French government as part funding of the olkaria II geothermal project.

“This unit will contribute an additional 35 MW to the national grid,” said Kengen Managing Director Eddy Njoroge.

The project will be co – financed by the World Bank to the tune of Sh1.9 billion and the European Investment Bank to the tune of Sh3.9 billion.

“Construction of this particular unit is at an advanced stage and it’s expected to be coming on stream by May next year,” Mr Njoroge said.

French Ambassador to Kenya her Excellency Elisabeth Barbier noted that that project was a milestone for Agence Française de Développement (AFD) which is directly supporting geothermal power in the country for the first time.

“Electricity connection in this country is very low and we would like to support it to go up,” Ms Barbier said.

The whole project is expected to cost Sh8.9 billion with the government expected to finance the remaining bit.

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