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Govt blamed for Mombasa refinery paralysis

18 October 2013, 09:35

Mombasa - India's Essar Energy has blamed Kenya for a part shutdown of the Mombasa refinery, the only one in the region which is now a hot market for hungry international oil traders.

The government did not enforce a deal to make local suppliers buy fuel from the plant, Essar said. A Kenyan official said Essar should have informed it of the situation for official action to have been taken.

Essar has said it would sell its 50 percent stake in Kenya Petroleum Refineries Ltd back to the government after abandoning plans for a $1.2 billion upgrade.

Oil products from Mombasa, which Essar co-owns with the government, serve customers in Kenya, Uganda, Rwanda, Burundi, Tanzania and parts of the Democratic Republic of Congo (DRC), but international traders are looking to gain market share, and also are interested in a range of new refinery projects in the region.

Brij Mohan Bansal, chief executive of the 50-year-old refinery, said on Thursday Essar was ready to upgrade it in June but financial consultants advised them against it, saying it would be economically unviable.

"The government also was not honouring the support agreement where price protection through refinery products is promised until an upgrade project is complete," Bansal told Reuters in his office at the refinery.

Linus Gitonga, director in charge of petroleum at the Energy Regulatory Commission, denied that government had flouted any agreement regarding the refusal by marketers buy from the refinery.

"If the refinery had issues with marketers abusing any agreement, they needed to notify us so that we commence investigations," Gitonga told Reuters.

"If that did not happen, then there is no reason to apportion blame."

Under the agreement oil marketers are required by law to buy at least 40 percent of all their fuel from the refinery.

But the refinery has come under sharp criticism from fuel distributors over the quality of its products. They want it shut down so that they can buy cheaper and better imports from suppliers of their choice.

Bansal said the plant has been left holding 10,000 tonnes of unsold products in its reserves for the last two months.

"Nobody is buying crude products from the refinery, and for now all we are doing is just preserving the facility and dispatching residual products. We shut down most of the plant because we are not processing," he said.

In April, hundreds of workers at the refinery protested against reports that the government was going to shut it down.

The energy Cabinet Secretary, Davis Chirchir, in June ruled out any possibility of closure, saying the government was keen to upgraded the facility.

- Reuters


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