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Taxpayers to pay extra Sh4.4b in revised oil pipeline settlement

Kenya Pipeline Company Managing Director Joe Sang told the committee that they are waiting for approval from the Energy Cabinet Secretary before paying the settlement which was arrived after KPC and the contractor engaged an arbitrator

NAIROBI, Kenya, Jun 6 – Kenyan Taxpayers could soon have to fork out an additional Sh4.4 billion to a Lebanese company as settlement for delays in completion of the new Mombasa-Nairobi pipeline.

Kenya Pipeline Company Managing Director Joe Sang and Company Secretary Gloria Khafafa told the Senate Energy Committee that the additional fee is due to challenges that Lebanese contractor, Zakhem International faced during construction.

The MD told Senators that the multi-billion shilling project faced major challenges including lack of financing, leading delays for over a year.

He told the committee that they are waiting for approval from the Energy Cabinet Secretary before paying the settlement which was arrived after KPC and the contractor engaged an arbitrator.

Khafafa said the arbitration process apportioned blame to KPC, consultant and the contractor who had demanded Sh19 billion as the settlement of the delay for project which was awarded four years ago.

The KPC management defended the additional payments, saying the failure to finish and hand over the project within the agreed timelines was partly because of design alterations that increased the scope of work.

Sang said Zakhem had requested four extensions since the initial September 2016 deadline, citing complexity of the project.

Construction almost stalled due to a contested tender award and subsequent litigation which dragged in the High Court for six months.

He said the 450-kilometre pipeline was undergoing testing and would be ready for use by the end of this month.

According to Sang, the new Sh48 billion pipeline can pump petroleum products at a rate of one million litres an hour from the current 750 litres an hour.

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“We are currently in the process of commissioning the pipeline from Kipevu, Mtito Andei, Sultan Hamud and we will have it ready for use on July 1,” he said.

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