Kenya is banking on the new $385 million Kipevu Oil Terminal to rip oil business out of the port of Dar es Salaam, which supplies the Great Lakes region.
Tanzania turned the tables on the port of Mombasa after persistent allegations of adulteration of petroleum products on the Northern Corridor. Then the three-year closure of the Uganda-Rwanda border and lower tariffs made both countries more dependent on the Tanzanian port.
With the new facility in Kipevu, Nairobi now plans to create a petroleum products center for the region in hopes of regaining its lost business. The government has also started to convert Kenya Petroleum Refineries Ltd’s (KPRL) Changamwe depot in Mombasa, a few kilometers from Kipevu, into a fuel and LPG storage facility.
This was announced by Kenya’s chief petroleum secretary, Andrew Kamau The East African that procedures are nearing completion for the Kenya Pipeline Company (KPC) to take over KPRL to make the facility a hub for larger vessels.
Mr. Kamau said the Kipevu Oil Terminal (KOT) will serve as an import and export facility.
“We will use this new facility as it has loading and unloading mechanisms that allow larger vessels to offload fuel, store it in the KPRL depot and then pump it back to smaller vessels serving Indian Ocean islands such as Zanzibar, Seychelles and Mauritius can and other countries that lack such a facility,” Mr. Kamau said.
“The construction of KOT and its peripheral facilities is intended to provide cheap gas and other petroleum products to Kenya and ensure a steady supply of such products to the East African and other Indian Ocean islands,” he added.
Nairobi is trying to lure back Uganda, the main user of the Mombasa port for transit cargo, to start importing fuel from Kenya to Kisumu via the North Corridor and then ship it through Lake Victoria via the $170 million new Kisumu fuel terminal.
Uganda imports at least 185 million liters of petroleum products per month, most of which are routed through the port of Kisumu and the Eldoret depot. Kenya transports about 900 million liters of petroleum products per month and relies on Tanzania’s inadequate fuel transport infrastructure to sustain Uganda’s petroleum handling business.
Last year Uganda said it was exploring ways to reduce its dependence on Kenya for oil imports by boosting supplies through Tanzania, a move that unsettled Mombasa port managers and the government mandarin.
Kampala currently accounts for three-quarters of the port of Mombasa’s transit cargo, and any drop in supplies could further hurt the facility, which has been trying to fend off growing competition from Tanzania’s Indian Ocean ports of Dar and Tanga.
In July, Uganda Railways Corporation (URC) began a trial shipment of 500,000 liters of petroleum products from Mwanza across Lake Victoria after a 16-year hiatus. Cargo from Dar port had been transported by train to Mwanza port.
It takes four days to transport freight from the port of Dar es Salaam to Port Bell in Uganda by road and rail.
URC chief executive Stephen Wakasenza said that while Kampala is happy with Mombasa, it was looking for an alternative route “for strategic reasons”.
“We are targeting oil because it is a product that is used on a daily basis. We aim to bring in 10 to 20 million liters per month on both routes and increase the capacity to 40 million liters,” Mr Wakasenza said, adding that they will be relying on a Kenyan boat to deliver around four to six million liters per month .
Kenya now says that with storage facilities in Mombasa and Nairobi connected to the old metre-gauge railway network, it will use freight trains to transport petroleum products, especially now that the KOT can dock at least four ships at a time.
“We understand the challenge ahead in terms of storage, that is, when a freight train arrives to evacuate such products, to avoid delays in unloading,” PS Kamau said.
Mr. Kamau acknowledged that the originally planned Eldoret-Kampala-Kigali Refined Petroleum Products Pipeline, one of the key projects that Uganda, Kenya and Rwanda had agreed to jointly implement as part of the Northern Corridor Integration Projects, dubbed the Coalition of the Willing, “was abandoned, unless new talks are initiated,” hence the new plan.
The pipeline was expected to cost US$1.5 billion, with the 350 km Eldoret-Kampala route costing US$400 million and the 434 km Kampala-Kigali belt estimated at US$1.1 billion.
The project would include the construction of the main line pumps, intermediate pumping stations and road or rail loading facilities for tankers. The initial design requirement would also have allowed for bi-directional flow with the installation of pumping stations to ship product from the proposed Hoima refinery in Uganda via Kampala to Kenya with another option to feed into the Kampala-Kigali pipeline.
But now Kenya wants to double capacity to handle transit petroleum products from the current 35,000 tons per month, enticing Uganda, Rwanda, Burundi and the Democratic Republic of the Congo to consider Mombasa as their main source of oil, as it will be cheaper than using the central one Corridor of Dar.
According to the Kenya Ports Authority (KPA), the old oil facility recorded a total bulk liquid throughput of 8.63 million tonnes in 2021, up from 8.37 million tonnes in 2020.
Acting KPA chief executive John Mwangemi said faster loading is likely to result in lower prices for LPG as oil marketers are expected to pass on the benefits of reduced mooring costs to consumers.
The new Kipevu Oil Terminal, built by China Communications Construction Company, will be connected to the deposits by both subsea and land-based pipelines and will be able to process five different fuel products: crude oil, heavy oil and three types of white oil products (DPK- aviation fuel, AGO diesel and PMS fuel).
The facility will be built directly opposite the second container terminal in the port of Mombasa and will have the capacity to handle vessels with a deadweight tonnage (DWT) of 200,000 and its own LPG line.
The new LPG terminal will have two LPG unloading lines, with KPC having rights to one line, while private companies will be allocated a second line, according to the government’s plan.
The second line will play a key role in ending the longstanding gas supply monopoly as it will bring new entrants into the business.
Kenya’s National Environment Management Authority (Nema) said at least 20 companies had expressed interest in the second line before construction, but only seven had submitted their bids for approval.
KPC currently receives imported LPG from vessels docking at the Shimanzi Oil Terminal and fills it into its tanks – T610 and T611, located at its Changamwe facility. The product is then evacuated through connecting lines to the local terminals for truck loading or filling.
The pipeline agency is already constructing a dedicated LPG storage facility with an initial capacity of 25,000 tons, which will play a key role in reducing gas costs by 30 percent once the facility becomes operational.