The Kenya Pipeline Company (KPC) faces a critical decision as the lease agreement for the Kenya Petroleum Refinery Ltd (KPRL) approaches its expiration in March. The facility, which halted refining operations in 2013, has operated as a storage hub since 2014 after Indian investor Essar Energy exited.
KPC acquired the lease in 2017 under a three-year arrangement, later extending it to 20 months. During this period, the company generated $20 million in revenue from KPRL's storage operations. However, internal divisions have emerged over the lease's future, with some board members arguing the refinery could operate independently.
"There is a debate within the board on whether the lease should be renewed or not. The popular feeling is that KPRL no longer needs KPC to manage its storage facilities," a source revealed. The refinery's board reportedly opposes KPC's $65 million plan to develop a liquefied petroleum gas facility on its land.
KPC, which invested $3 million to modernize KPRL's storage tanks, claims the upgrades boosted Kenya's strategic petroleum reserves from 12 to 30 days. The company also paid $3.8 million in interest on KPRL's bank loans over 20 months. However, concerns persist about KPRL's financial stability, including $95 million in outstanding compensation claims to oil marketers.
"KPC earned Ksh400 million ($4 million) from KPRL last year. This shows that storage is serious business," said Petroleum Principal Secretary Andrew Kamau, citing The EastAfrican. Despite KPC's financial commitments, industry analysts question KPRL's ability to manage its debt and operations without the pipeline company's support.
