Business Daily (Nairobi)
Zeddy Sambu
27 August 2007
Nairobi — Like many of the countries whose economies are on the take-off, fueling the growth of the Kenyan economy has emerged as one of the most pressing problems facing policy makers.
The past four year of steady economic growth has seen demand for electricity rise at the rate of 10 per cent annually against a supply growth of about 8 per cent kicking off a reserve thinning process that key players are now seeking to address by shifting the activities of bulk consumers to off peak hours.
More recently, the total electricity supply rose by 15.4 per cent from 466.1 million KWh in April, to 538.2 million KWh in May 2007.
But progress on this front has been dimmed by a steep rise in peak demand from by 18 per cent from 827 MW to 975 MW by the close of March this year against an installed capacity of 1037 MW.
As the economy continues to expand, demand is expected to continue rising, raising the possibility of an energy crisis that may conversely slowdown the growth.
Demand for electricity is expected to grow at an annual rate of five per cent in the next 10 years posing a big challenge to players in the electricity generation business.
Analysts say the pressure on electric power is mainly because Kenya lacks alternative energy sources such as coal and oil, making the country largely dependent on hydropower, which accounts for about 60 per cent of the total electricity supply.
In the first quarter of this year, total consumption of petroleum products declined by 4.4 per cent from 696 000 tonnes between January-April, 2006 compared to 666 000 tonnes in the first quarter this year.
Yet overall consumption of petroleum products rose significantly helped by heavy demand from the manufacturing and transport sectors.
Besides, consumption of Liquefied Petroleum Gas (LPG) rose by a margin of about 59 per cent in the last four years signalling a shift in lifestyle at the household level away from wood-based fuel.
The Petroleum Institute of East Africa (PIEA) reckons that this development should boost current per capita consumption of LPG to more than 12kg -- that is considered suitable for the Kenyana economy.
Continued growth in demand for petroleum products in the region has recently pushed Kenya Pipeline Company - a key supplier to operational limit.
Total throughput by the Kenya Pipeline Company between 2002 and 2006 increased by 39 per cent, mainly due to increased economic growth in the region and also the extra burden imposed on diesel consumption by thermal electricity generators in Nairobi, Eldoret and Uganda.
Renewed Libya/Kenya Energy Co-operation following President Kibaki's trip in May has opened the way for state owned Tamoil to be involved in the financing of the Mombasa refinery upgrade, pipeline capacity enhancement, development of LPG imports and storage facilities.
The refinery upgrade is estimated to cost $250 million while the LPG facilities are at $45 million.
Further, the bilateral trade co-operation is expected to make available to Kenya petroleum products and crude oil at concessionary prices, under terms that were set to be discussed this July in Nairobi.
Tamoil are already in Kenya downstream marketing after acquiring Mobil assets in Nov 2006. Tamoil also won the tender (51per cent participation) to extend the pipeline from Eldoret to Kampala in partnership with the governments of Uganda and Kenya.
Libya is an oil and gas producing OPEC giant with Europe as its main market.
Her entry into Kenya is projected to provide between 30 per cent and 40 per cent of national requirements.
It is understood that a Kenyan ministerial delegation to Venezuela in June discussed possibilities of future sales of petroleum to Kenya by Venezuela at concessionary rates. Co-operation in areas of oil and gas exploration was also among other issues discussed.
Kenya recently opened an embassy in Brazil to promote business relations with mostly oil-rich South American countries.
Venezuela which produces crude oils that are heavy and mostly with high sulphur content and destined mainly for the USA market.
President Hugo Chavez has of late used its huge hydrocarbon resources to extend its influence across the globe.
Recently , he engaged in a virtual nationalization of oil production assets in the country thus reducing control of oil by international oil majors.
Only refineries with sufficient cracking and sulphur removal capabilities would benefit from Venezuelan crude oils.
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