Projects

 PROJECTS UNDER THE DEPARTMENT OF PETROLEUM ENERGY.

Upstream

The process of reviewing and updating the Petroleum (Exploration and Production) Act (Cap. 308) to align it with the current international practice is ongoing. The review which, is being supported by both the African Development Bank (ADB) and World Bank, is expected to inter-alia, enhance value chain for Kenya including fiscal revenue. The reviews will cover licensing procedures, revenue sharing agreements between oil companies, central and county governments, and the local communities.

Other provisions to be included are local content (developing local capacity to take up jobs in the oil companies, corporate social responsibility issues, prioritizing tender awards to local communities in line with their capacity to deliver), environmental protection, and human rights issues. The review will formulate in the new legislation to provide for: Gas Sharing Terms; Compensation, windfall profits, royalties and corporate social responsibility; Terms of assignment and change of control and transfer of PSCs and charge of royalties on revenues earned as a result of assignment or transfer of PSCs to 3rd parties by licensees. These reviews will provide initiatives that will incentivize both current and new players in the oil and gas exploration sector.

The government is in the process of reviewing the energy policy in order to develop a policy on management of commercial discoveries of the petroleum resources. The government plans to enhance corporate governance in its institutions charged with petroleum exploration and development and also in the process of restructuring and enhancing NOCK’s financial capacity to conduct upstream business.

 

Midstream

In its master plan, the Kenya Ports Authority (KPA) is scheduled to re-locate the Kipevu Jetty and link it with a pipeline.

The Government has commissioned a feasibility study for an offshore jetty facility to reduce congestion and receipt of larger vessels with the National Oil Corporation of Kenya (NOCK) championing the construction of this facility through a Public Private Partnership (PPP).

In the proposed Lamu Port project Master Plan, a detailed design for the first three (3) of thirty two (32) berths for export of crude oil from South Sudan was completed and preparations for construction of initial 3 berths and associated port infrastructure are underway.

Kenya Pipeline Company (KPC) has commissioned a feasibility study to replace the current Mombasa-Nairobi product oil pipeline. It also plans to construct a 14 inch spur-line to Kisumu City in Western Kenya to complement an existing 6 inch multi-product oil pipeline with plans and negotiations underway to extend the pipeline into Uganda and later to Rwanda.

Another multi-product oil pipeline is planned to be constructed from Nakuru town in Western Kenya to Isiolo town to serve Central Kenya demand.

A crude oil pipeline from South Sudan to Lamu via Isiolo and refined products multi product oil pipeline from Isiolo to Ethiopia has been planned for construction. Similarly, a new refinery is planned to be set up at Isiolo to process crude oil from South Sudan and Kenyan crude oil in case it is commercially viable.

Modernisation of the current toping oil refinery operating at 40% of its design capacity to process four (4) million tonnes is expected to be completed by 2015.

 

Downstream

Petrocity is a company registered to trade in oil products in Kenya. It is constructing a to 40,000 cubic meter storage facility at the recently-launched Konza City in the initial stage and at tender stage for an additional 100,000 cubic meters. The Phase I of this facility is set for commissioning during the 2nd quarter of 2013. This facility will help the country secure additional stocks and ensure security of supply of petroleum products.

VTTI has commissioned a storage facility of approximately 100,000M3 of petroleum products in Mombasa. This facility that has capacity to push product to the KPC main line with ease will alleviate the huge demurrage costs incurred by avoiding additional storage. The facility will store cumulative gas oil. VTTI has further expressed their desire to construct additional facilities in other parts of the country including Nairobi.

The Africa Gas and Oil Company has also expressed a desire to construct such a petroleum storage facility. The firm has already constructed an LPG import terminal at Miritini in Mombasa. This facility will receive bigger vessels of LPG in the country and subsequently eliminate demurrage and assist the country enjoy economies of scale astounded with bigger vessels.

The 14,000 million tons facility will be common user storage and bottling facility to all LPG importers. An Open Tender System (OTS) is to be coordinated for this facility and both the OTS and a through-put agreement have been finalized and are set for signing in March 2013. Each oil marketing company trading in LPG is set to be allocated usage prorata to its LPG market share.

Kenya Pipeline Company (KPC) is also set to construct LPG storage and bottling plant in Athi River, Nairobi to increase LPG storage in the country and enhance the through put for the AGOL import and storage facility in Mombasa.

Addax is currently constructing storage and bottling plant in Nairobi. Furthermore other investors have expressed their desire to construct other LPG storage and bottling facilities in Nairobi.

To ensure that oil marketing companies do not clog the KPC system, the Ministry of Energy has cautioned against storing of products in the pipeline and those going against the regulation will be locked out of it. For local products, oil should be evacuated within seven (7) days while for transit products, evacuation should be within fourteen (14) days. In addition, oil marketing companies that do not lift products from KPRL in line with the legal notice No. 24 of April 2012 and KPRL off take agreement will also be kicked out of the KPC system and de-licensed.