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NOT AN OFFICIAL UNCTAD RECORD. Viability of Small Refineries: Kenyan Perspective Presentation to: UNCTAD 11 th Africa Oil & Gas, Trade and Finance Conference Nairobi Kenya By John Mruttu General Manager 24 th MAY 2007. contents. Current configuration.

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NOT AN OFFICIAL UNCTAD RECORD

Viability of Small Refineries: Kenyan Perspective

Presentation to:

UNCTAD

11th Africa Oil & Gas, Trade and Finance Conference

Nairobi Kenya

By

John Mruttu

General Manager

24th MAY 2007


Contents
contents

  • Current configuration.

  • Constraints & search for alternatives

  • Proposed investment proposals and impact

  • Viability of small refineries: our experience and key enablers.


Where we are

To Nairobi

Ethiopia

To Malindi

Sudan

Somalia

You are here

Tanzania

Uganda

Australia

Nyali

Likoni

Indian Ocean

Mombasa

Where We Are


CORPORATE STRUCTURE

KPRL BOARD

4 Directors GoK appointed, 4 Directors appointed by Industry

KPRL

Refinery Customers Processing Agreements



Existing configuration

gas

petrol

hydrotreater

reformer

DPK

Diesel

Fuel Oil


Competitive constraints
Competitive constraints

  • Hydro skimming configuration.

    • High yield of residue

    • Lack of residue conversion facilities results in poor refining economics

  • No sulphur removal capability for diesel.

    • Diesel will not meet low sulphur specifications in line with international trends.

  • Dependant on light& sweet crude oils.

    • Relatively expensive

    • Light crude- US$60 per barrel, heavy crude: US$53 per barrel (FOB)

    • After upgrading heavy crude oils will be the primary raw material

  • Frequent power interruptions resulting in under utilization and reduction in processing efficiency


Search for options
Search for options

Ministry of Energy Study on KPRL conducted by KBC Process Technology May 2004, main conclusions:

  • In its current configuration the refinery requires support to remain viable.

  • Investment is required to secure a competitive position and meet product specifications.

  • Upgrading the refinery is more beneficial than product import terminal.

  • Thermal Gas Oil Unit recommended for residue conversion.


proposed configuration

gas

hysomer

petrol

hydrotreater

reformer

DPK

Diesel

Diesel treater

Fuel Oil

Thermal gasoil unit




VALUE ADDITION

Added Value

39.2 MUSD/a

Current Fuel Oil demand

Future Fuel Oil demand



Potential sources of funds
Potential Sources of funds

  • several financial institutions including local banks, foreign banks, export-credit agencies have indicated willingness to finance the investment.

  • However, the maximum borrowing is 70% of estimated costs. 30% equity contribution is required.


Viability of small refineries our experience
Viability of small Refineries: our experience

  • Financial benefits.

    • Least cost option for product supply in the country.

    • Attractive return on investments

  • Alternative supply routes

    • Ability to exploit emerging sources of crude oil in the region thus diversifying supply routes and hence improving the security of supply.

  • Social benefits

    • Creation of 300 jobs during construction period and another 100 jobs during operation.

    • Distribution of wealth to approx 1000 families

    • increased supply of LPG at reduced cost in the country with the associated health and environmental benefits.

    • Technology transfer and manpower development


Viability of small refineries key enablers
Viability of small refineries: key enablers

  • Strong domestic demand; offshore export market more difficult.

  • Residue conversion: hydro-skimming will not work.

  • Convergence of Product specifications: negotiate for phased (timing) approach

  • Financial viability should not be the only criteria:

    • Social benefits count as much.

    • Emissions. What is cost to the environment when Africa exports crude oil to another continent and imports finished products?


Way forward for kprl
Way Forward for KPRL

  • Government of Kenya’s support for the proposals to upgrade the Refinery has been announced.

  • The Company has been mandated by the Board to:

    • Update the cost estimates

    • Progress the development of options for project financing (equity & debt)



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