The Star (Nairobi)

17 March 2014

Kenya: Senate Team Wants KPC Sale Postponed

PARLIAMENT wants Kenya Pipeline Corporation upgraded to a more powerful status similar to Kenya Revenue Authority and Kenya Ports Authority.

The Senate's standing committee on energy, roads and transportation consequently says the planned privatisation of KPC-- valued at over Sh45 billion by assets-- should be indefinitely deferred.

This, the nine-member committee argues, will allow the government undertake overhauling infrastructural development to enhance KPC's net worth and strategic position in the bloated oil industry before entrusting it to private hands.

In a report laid before the house on February 27 based on a last August's familiarisation tour, the committee recommends that the government "supports KPC's endeavours to source external funds for development of all major oil pipeline infrastructure".

KPC should represent government interest in development of regional and local pipeline infrastructure including the mega, cross-border Lappset project, the report recommends.

The Gideon Moi-led committee further says the National Treasury should fund construction of a new pipeline to replace the overloaded, 36-year old, 450 kilometre Nairobi-Mombasa line to enhance efficiency.

The Nairobi-Mombasa line, the largest of KPC's six-line 1,227.6 kilometre network, was in 1978 designed to handle a capacity of 879,776 cubic metres but this has since shot up more than four-fold to 4.54 million cubic metres as at June 2012.

The report also recommends that KPC should take over ownership of Kipevu Oil Storage Facility, where it pays Sh384 million in annual rent to Kenya Ports Authority, and assets of grounded Kenya Petroleum Refineries if a separate proposal to turn it into an oil storage facility sails through.

Other recommendations include building of an offshore oil jetty by the KPC.

This will supplement the KPA-owned Single Jetty, that handles 99 per cent of Kenya's imports through the port of Mombasa, which the committee wants relocated and expanded to receive four vessels at once.

The Nairobi's Industrial Area-based KPC is among a few parastatals that are profitable having doubled its turnover in four years to Sh16.5billion in 2012 from Sh8.3 billion in 2008 with a profit before tax of Sh7.8 billion in 2012.

The report calls for an integrated security surveillance system to help in "delineation and securing of company(KPC) right of way and facilities against terrorist threats, encroachment and vandalism".

"Probably, there is need to establish a Kenya Pipeline Police Unit just like KPA and KRA," the report recommends.

It adds that KPC should be facilitated to upgrade its fuel hydrant system at the JKIA and Moi International Airport in Mombasa following an embarrasing airlock that temporarily affected pumping capability on August 5 at the JKIA.

The government should further enforce ban on transportation of transit fuel from Mombasa by road "to save road infrastructure" and engage KRA in debonding KPC's facilities to handle only duty paid products, the report states.

Besides, the committee enforcement of strict regulations for the 79 licensed oil marketers to keep and maintain adequate fuel stocks that last a minimum of 21 days.

The number of oil marketers should also be cut since about 22 companies were not actively using the pipeline, the committee has recommended.

This will enhance evacuation of product at Nairobi terminal from about 5,000 cubic metres a day when KPC handling capacity was more than double at 11,000 cubic metres.

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