Lack of a clear mandate on managing the Sh40 billion Kipevu Oil Terminal II forced the Kenya Ports Authority and the Kenya Pipeline Company to sign a service level agreement.
In the agreement, signed on Wednesday, KPA and KPC have their obligations and responsibilities clearly outlined for operation and maintenance of the terminal.
The SLA will create synergy and help in reducing conflicts between the two government entities, said KPC managing director Joe Sang.
“We have worked on this agreement for the last year and the SLA stipulates our role as KPC and the role of KPA. Our role as KPC is to provide security of supply of petroleum products across the region,” Sang said.
He said they are now focused on bringing nine billion litres of petroleum products through the pipeline by the end of the year.
“We can bring in through the pipeline 8.1 billion litres of petroleum products every year, which is an increase from the 7.5 billion litres annually in the last two years. This year, we are targeting close to nine billion litres,” Sang said.
Sang said 60 per cent of the products coming into Kenya are consumed locally, with the remaining 40 per cent destined for the transit market stretching along the Northern Corridor, going downstream as far as South Africa.
He said Uganda had committed to fully using the second Kipevu oil terminal to import all its petroleum products, beginning June this year.
Kenya has been servicing Uganda with about 90 per cent of all its petroleum products through the Northern Corridor, tracking it through Dar es Salaam to Kampala, which is double the distance of about 1,450 kilometres compared to KOT2 directly to Uganda.
“Uganda has committed that, as from June, they will be able to bring all their products through Kenya and use our facilities here in KPA as well as KPC facilities.”
“We want to assure them we are ready to serve the market and we want all the molecules, volumes and litres of petroleum products to be transported through the pipeline because it is very safe, efficient and cheap,” he said.
In terms of additional storage capacity, Sang said KPC will soon commission a 100 million-litre bulk storage facility in Changamwe.
We are improving connectivity in terms of the flow of products
KPC, through a partnership with the private sector, will also do a 4km pipeline right from the manifold at KOT2 through to KPC facilities in Changamwe.
The Changamwe facility will sit in part on the 300 acres owned by Kenya Petroleum Refineries Limited, which is now under KPC.
“We are coming up with a master plan to establish KPC refineries as a trading hub for this region. We want to be able to serve about 12 countries in the larger East African region,” Sang said.
“We are also improving connectivity in terms of the flow of products.”
KPA managing director Captain William Ruto said despite the KOT II being owned by KPA, they will work closely with KPC, who are the receivers of petroleum products coming through the facility.
He said they are looking at providing a space for KPC to set up a lab at the facility to reduce the time used to transport samples to KPC laboratories in Nairobi and back.
“We want to reduce all costs by working together, synergising together and seeing how best we can improve our efficiency,” Ruto said.
“It is important for us to give ourselves specific time lines to reduce the cost of doing business. Time is money. If we delay, we incur costs.”
The facility, he said, does not only belong to Kenya but to the region too, given the fact that about 50 per cent of the products coming through the facility are destined for landlocked countries in the region.
The facility can offload 8,000 cubic litres (8 million litres) per hour and can handle four vessels at the same time.
“We want to support the government in offloading here because we can handle four ships at the same time. One can be discharging LPG, another PMS (petrol) and another AGO (diesel), all these products can be offloaded simultaneously in this facility,” Ruto said.
“This will reduce the cost of doing business and cut the cost of demurrage we incur as a country.”
The MD said the design of the facility allows them, when capacity and demand increase, to deepen the place further without affecting the infrastructure.
The facility is dredged to minus 15 metres and has provision to re-dredge to up to minus 18 metres.
The facility, Captain Ruto said, also allows private firms to connect to the berth through the common user manning front and anybody who wants to plug in can do so.
“As KPA, we have done what we call a common user manning front where anybody can plug in. We have done the marine side and have even extended our pipeline to KPC, where anybody can connect,” he said.
Present during the signing of the SLA were KPA board chairman Benjamin Tayari and KPC chairperson Faith Boinett.
The new oil terminal is an offshore facility at the Port of Mombasa, opposite the existing Kipevu Oil Terminal, constructed in 1963.
In April of 2022, the government started the first test run of oil dispatch at the facility.
The project consists of one offshore island terminal with four berths, with a length of 770m and one workboat wharf at Westmont for landing facilities.
It also has five subsea pipelines buried under the seabed to allow for future dredging of the channel without interfering with the pipes.