A Review of the Nigerian Energy Industry

Kenyan govt accused of failing to manage Essar exit at KPRL

uhuru kenyatta-85209 January 2014, Nairobi – The Kenyan government has been accused of dragging its feet in resolving the Kenya Petroleum Refinery plant stalemate which has since seen the Changamwe plant halt operations.

The Kenya Petroleum Workers Union yesterday said the government is to blame for failing to boldly handle the matter which could save the refinery. The Mombasa based refinery stopped its operations four months ago after its future became uncertain.

This follows failure to agree on the terms of the planned exit by Indian firm Essar Energy and the government who own the plant on a 50-50 share.

KPWU Coast region secretary Rafael Olala said the refinery could have been saved if the government was serious but it is collapsing due to lack of commitment to salvage it.

“The government has something to hide on this issue. No government will seat back and see a plant going down without putting any efforts to save the situation. The government is failing us on this matter,’ said Olala.

The two partners have had to reschedule two meetings at the end of last year, which were meant to agree on Essars sale terms. The two are supposed to agree on whom will shoulder liabilities when Essar exits the refinery after a four-year management deal.

Among the liabilities is a Sh21.62 billion loan from Standard Chartered Bank secured on June 20, 2012 to transform KPRL from a toll to a merchant refinery.

Essar announced its plans to offload its stake at the plant in October on what it termed as advice from its international consultant against its commercial viability. The Indian subsidiary offered to sell its 50 per cent stake to the government for Sh432.5 million.

According to the Union, all contractors at the plant have already been terminated with most of them going unpaid. Hundreds of employees are also uncertain about their future with their last salaries being paid in the month of November last year.

The employees were paid after the refinery sold all its remaining fuel deposits leaving the tanks at the plant empty according to the union. “The employees were paid 50 percent of their November salary on December 5, this is January, people need to take their children to school, pay rent among other expenses, how will they live,” said Olala.

Sources privy to the discussions have previously indicated that Essar has demanded that the government clears all outstanding arrears including unpaid workers’ dues.

The government on the other hand is said to blame Essar for failing to remain committed on upgrading the facility as earlier planned at a cost of Sh104 billion ($1.2 billion).

The upgrade of the 53-year old refinery’s technology and capacity refinery was due in 2010. But Essar said on October 3, last year that it was opting out.


– The Star

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