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Kenya: High Refinery Costs to Raise Petrol Prices

9 May 2008

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Nairobi — Kenyans should start preparing to pay more for petroleum products before the end of the year.

This is because the local cost of refining a barrel of crude oil will have risen by then.

Kenya Petroleum Refineries Ltd plans to hike the processing fee of crude oil by nine per cent from October 1 due to increased operating costs and a significant reduction in revenues.

High inflation

KPRL's general manager, Mr John Mruttu, said the processing fee of a barrel (159 litres) of crude oil at the Mombasa-based plant will increase by nine per cent from US$2.15 to US$2.35.

"Basic processing fee was last increased in September 2006 and inflation since then has increased by more than 11 per cent," he said in letter dated March 31 and sent to marketing companies.

The refinery's management issued a six months notice of increase of fees in accordance to an agreement signed with firms that process crude oil locally.

Operating costs

Mr Mruttu said KPRL's operating costs had increased and revenues had declined significantly as processing fees paid in Kenya shillings had gained considerable strength against the dollar since the last review.

In 2006 when the last increase was effected, the exchange rate was Sh72 to the dollar while in March this year, this had reduced to Sh62, which KPRL's says translates to 14 per cent appreciation of shilling.

The management argues the processing fee oil marketing companies are charged, has to go up to enable Kenya Petroleum Refineries Ltd maintain a viable operation.

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