Kenya Refinery Explores $1 Billion Funding Options for Upgrade
Kenya Petroleum Refineries Ltd. is weighing its financing options as it seeks to raise $1 billion of debt and equity for a planned upgrade of its facility built half a century ago.
Standard Chartered Plc, which is helping raise the funds, will hold consultations this week on possible financial arrangements and a decision should be taken by the end of May, Oscar Ngaiza, KPRL’s manager of large projects, said.
“By the end of next month we should know how much we want to raise as debt and how,” Ngaiza said in an interview on April 19 in Kenya’s capital, Nairobi.
Renovations at the Mombasa-based refinery will increase processing output to 4 million metric tons by 2019 from 1.6 million tons now and improve efficiency, leading to lower prices for its refined petroleum products, Ngaiza said. The work was originally slated for completion in 2015-2016.
Kenya may become an oil producer after Tullow Oil Plc (TLW) and Africa Oil Corp. (AOI) last year discovered the country’s first crude deposit, which is still being tested for commercial viability. All of the country’s fuel consumption is currently met through imports.
KPRL, the East African nation’s sole oil processor, began operating under the so-called merchant refinery model last year, in which it sources its own crude, rather than buying from oil- marketing companies. Refining the crude at KPRL costs 6 percent more than purchasing imports, Ngaiza said, citing outdated technology at the plant and other inefficiencies.
KPRL is jointly owned by Essar Energy Plc (ESSR) of India and the Kenyan government. The country has plans to build a second refinery at the planned port of Lamu connected by a 2,000- kilometer (1,243-mile) pipeline to oil-rich, neighboring South Sudan.
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