Essar takes up 50pc of Kenya refinery

July 31, 2009

, NAIROBI, Kenya, Jul 31- Indian firm Essar Energy Overseas Limited has finally completed acquisition of the 50 percent stake at the Kenya Petroleum Refineries Limited (KPRL).

This is after private companies Shell BP and Chevron sold their stake in the refinery and the government declined to take its pre-emptive rights.

Essar Group Chief Executive Prashat Ruia said on Friday that the group intends to upgrade the plant by adding secondary units to the project at a cost of  about Sh30 billion.

“We will be working very closely with the government in the next few months to put a plan of how exactly we will deliver on the job,” Mr Ruia said.

Mr Ruia said the group would further be investing in a distribution and retail business to bring products closer to consumers.

Finance Minister Uhuru Kenyatta said the transaction marked the end of negotiations between the two parties, over the last several months, which had resulted in the signing of a Share Sale and Purchase Agreement between them.

Mr Kenyatta noted that in support of this process, the government had waived its pre-emptive rights in KPRL.

“Indeed the Government had the option to purchase the shares held by the independent oil companies but chose not to do so, in order to maintain our shareholding at the current level of 50 percent,” he said and revealed that the government had received a consideration of Sh152.9 million from Essar.

“This amount of money will be added to Sh1.6 billion that the government has so far set aside as equity to fund the modernisation of the refinery,” he added.

Speaking while witnessing the signing  ceremony Prime Minister Raila Odinga  observed that the new partnership would inject new impetus at the refineries which required expansion and installation of state-of-the-art equipment to cope with modern trends and demands in the energy sector.

“We invite the new investor to partner with the government in running the refinery to reap the opportunities in the market so that quality products are produced in large scale to meet the market demands,” the Premier said.

He noted that the energy sector faced a myriad of challenges but expressed optimism that the venture was likely to inculcate sound technical management skills at the facility.

Meanwhile the government has finally admitted that it has shelved the idea of introducing price controls in the oil industry.

Permanent Secretary in the Ministry of Energy Patrick Nyoike said the idea was mooted to encourage competition in the sector which has now happened.

“Decontrolling was meant to induce competition and as you can see now there is competition. Prior to 1994 I (the Energy PS) used to be the price controller and it used to waste a lot of time because we as a country had no control over external factors,” Mr Nyoike said.

He said the decision was finally reached after recommendations of the National Economic and Social Council (NESC).

Mr Nyoike noted that the introduction of price controls would increase the burden on the exchequer.

“And the situation remains that way until further notice,” he said.

The government had threatened to introduce price controls after motorists complained that the oil companies were not passing on the benefits to consumers.

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