The Mombasa-based refinery will now import crude oil, process and sell refined products to oil marketing companies.
KPRL has been operating as a toll refinery since inception 50 years ago, whereby oil marketers have been importing crude oil and processing at the refinery for a fee.
Officiating the signing agreement between the two parties, Ministry of Energy Permanent Secretary Patrick Nyoike said the upgrade is expected to sharply reduce the cost of refining oil and hence the cost of petroleum products in the country.
“January 1 was not possible and therefore after further consultation it was agreed that, we shift to April 1. And because of financial challenges in terms of working capital requirements, again they came and requested, they be given another last chance. And on that basis it was agreed that June 30 will be their last day to operate as a tolling facility,” Nyoike said.
The Sh21 billion loan is part of the Sh90 billion the refinery requires to be fully modernised a process which Nyoike said will be complete by 2017 and not 2015 as planned due to lack of finances.
Apart from processing and selling of petroleum products, the refinery is also expected to start generating its own electricity and reduce reliance on power from the national grid that has in the past been blamed for major break-downs.
KPRL CEO Mohan Bansal said the power plant will be commissioned this September this year.
“The power project is under implementation at an advanced stage and with this power plant, our power requirement will be completely stable which was a major concern for the refinery,” Bansal said.
The refinery’s annual production is set to increase from the current 1.6 million metric tonnes to 4 million metric tonnes of petroleum products. The products will include super petrol, diesel, kerosene and liquefied petroleum gas.
KPRL is owned by the Kenyan government and Essar Energy Overseas Ltd of India.