KPRL signs new agreements with oil marketers

October 3, 2012
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, NAIROBI, Kenya, Oct 3 – The Kenya Petroleum Refineries Limited (KPRL) has signed new Product Offtake Agreements with the oil marketing companies.

The Mombasa-based refinery shifted to the merchant-model in July, which allows KPRL to import crude oil for processing at its Changamwe plant, at the rate of 133,000 tonnes of crude per day.

KPRL CEO Brij Bansal refuted claims blaming the refinery for the recently cancelled crude oil tender, on the account that tendering processes were not followed.

“Precedents clearly demonstrate this. Through the Ministry of Energy, we are engaged in normal tendering processes and whoever wins the tender, supplies the commodity to KPRL,” he said.

Bansal added that there was nothing unusual with the process in terms of tendering and the premium.

“During the tendering process, the prices are not quoted by KPRL but by the oil importing companies. The ministry then awards the tender to the lowest bidder,” said John Mruttu, KPRL General Manager.

“Kenya is a small player in the global energy market that cannot influence the global oil prices. The basis of the tender is on cost of freight and the bidders profit margins, which depend on discounts and premiums ruling at the date of tender,” he added.

KPRL is currently in negotiations with the crude oil importing companies for the re-opening of the tender for the supply of 160,000 tonnes of crude oil for processing in November and December this year.

The refinery says the existing crude oil stocks will last until October 28 and the new cargoes are expected to arrive shortly thereafter.

“There is therefore no reason to be concerned about security of supplies as there is sufficient time to mitigate a possible shortage and enough time for the new import to arrive,” Bansal said.

However, the refinery revealed that there was a delay in signing the Product Offtake Agreement as issues relating to pricing of products and payment terms had not been agreed upon.

Due to the resultant delay in signing of Product Offtake Agreement, the upliftment of products from the refinery in August and September was very poor against the allocation by the Ministry of Energy.

This resulted in huge build-up of crude oil and product inventories, hence significant demurrage on subsequent crude oil cargoes.

KPRL says it is hopeful that soon it will be in a position to start processing crude oil at normal rate of 133,000 tonnes per month and make up the shortfall during the year to date.

Bansal said steps are also being taken to improve the crude oil processing capacity to meet the demand for Kenya and its East African neighbours for refined petroleum products that they import from Kenya.

Last week, the Energy Ministry cancelled a crude oil tender following irregular tendering procedures. The tender would have increased the cost burden on fuel consumers in the next two months had it gone through.

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