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Hundreds might lose jobs as govt invites investors in Changamwe refinery

26 November 2013, 12:35 Harrison Mbungu

Mombasa - Hundreds of workers in the Changamwe oil refineries company might lose their jobs as the government is considering inviting bids for a new investor for East Africa's only oil refinery, officials said.

There had been claims that the govt plans to convert it into a storage plant, after co-owner, India's Essar Energy, said it plans to exit.

Essar said in October it would sell its 50 percent stake in the Mombasa plant after its $1.2 billion upgrade plans were abandoned after consultants said it was not economically viable.

Linus Gitonga, the director of petroleum at the Energy Regulatory Commission (ERC), said that once Essar's exit is finalized by Nov. 28, the government would take full ownership of the refinery and weigh its options.

"There are several options for government, including finding an alternative investor or converting the plant into a storage facility," Gitonga said.

"I don't think shutting it down completely will be an option," he said.

The decision to keep the plant working is backed by prospects for an oil and gas boom in the region following a string of discoveries in Kenya and Uganda and nearby states that could soon transform an area that has long depended on imports to an energy exporter.

Essar had planned to increase the refinery's crude handling capacity to 4 million tonnes of crude oil per year (79,000 barrels per day) by 2018 from the current 1.6 million but oil marketers in Kenya, unhappy with the refinery's products and costs, have called for its closure.

The company blamed the government for not enforcing a deal requiring local suppliers to buy a certain portion of fuel from the plant, saying this hurt the business, but Kenyan officials said Essar should have informed the government sooner that oil marketers were not supporting the refinery.

Essar bought a 50 percent stake in Kenya Petroleum Refineries Ltd (KPRL) in 2009 for $7 million from a group of oil marketers - BP, Chevron and Royal Dutch Shell.

Although the government and Essar have agreed to part ways, they are yet to agree on how to handle the refinery's current liabilities which have grown while it struggled to move its stock of refined crude products, officials said.

Oil products from the plant serve customers in Kenya, Uganda, Rwanda, Burundi, Tanzania and parts of the Democratic Republic of Congo (DRC).

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