A Review of the Nigerian Energy Industry

Kenyan refinery workers go without pay as Essar sale stalls

Essar27 January 014, Nairobi – The fate of hundreds of employees at the closed Kenya Petroleum Refineries Ltd still hangs in balance as the government drags it feet on reaching an the exit agreement with its Indian partner, Essar Energy.

Essar publicly declared on October 3 last year that it would relinquish its 50 per cent stake in the Mombasa-based facility to the state for Sh434.8 million ($5 million), but the two are yet to agree on exit terms.

The two partners disagreed during a closed door meeting held on November 11 on who should absorb accumulated liabilities of the Mombasa-based facility whose operations have stalled since last October.

Sources indicated that Essar insisted that since it was reselling its stake at 28.57 per cent less the Sh608.72million ($7 million) it paid Shell, Chevron and BP for the same in July 2009, the government should bear outstanding liabilities.

A follow-up meeting set for November 26 was moved to November 29 but this also failed to take off.

Energy and Petroleum Principal Secretary Joseph Njoroge said last Thursday that the meeting did not take place as directors of Essar were on Christmas holidays in India. Njoroge also said the talks have stalled due to a “legal aspect.”

“We are waiting for the other shareholder to come back from holidays before we hold the meeting,” he said. “We expect the meeting to take place in about three weeks, although there is also a legal aspect to this.”

KPRL CEO Brij Bansal, who represents Essar’s interest in the laborius negotiations, refused to comment in a telephone interview from India on January 8, maintaining he was on holiday.

Kenya Petroleum Workers Union secretary general for Coast region Rafael Olala claimed on January 7 that refinery workers had at the time only been paid half their November salary.

Energy Secretary Davis Chirchir said on November 14when he appeared before parliamentary committee on energy that the workers will be redeployed in other government departments and parastatals once the fate of the facility is determined.

The government has since settled on converting the refinery into a storage facility, Chirchir was reported in one of the dailies on Tuesday as saying.

Among the disputed liabilities is a Sh21.62 billion ($250 million) billion loan from Standard Chartered Bank secured on June 20, 2012 to transform KPRL from a toll to a merchant refinery.

The government is said to have blamed Essar for breaching its contractual obligation including a failed upgrade of the refinery’s 53-year old technology and improving its capacity.

The upgrade which was to start in 2010 at a cost of Sh104.35 billion ($1.2 billion) was cancelled by Essar in a statement on October 3 following an advice from its international consultant against KPRL’s commercial viability.


–  The Star

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