Joined: 05 Oct 2005
Posts: 315
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Libya Oil expects to buy a 50 per cent stake in Kenya's sole refinery owned by three oil marketers.
Shell, BP plc and Chevron, have expressed their interest to cede their shareholding in the Kenya Petroleum Refineries citing low returns on the investment. The Kenyan government owns the remaining half of the refinery and is currently working on an upgrade to turn around the refinery at a cost of Sh17.5 billion. The Libyan firm, formerly Tamoil, says there have been no negotiations or contacts so far with the three oil marketers. "If the shareholders (of the refinery) are in agreement then I would say we are keen on the refinery project," Mr Kamel Jarnaz, the managing director of Libya Oil Kenya, told Business Daily . Besides its interest on the refinery, Libya Oil has in recent months been busy in the local petroleum front. First it won the tender to expand the petroleum pipeline from Eldoret to Kampala in a joint venture with the Kenyan and Ugandan governments. Later, it extended a Sh21 billion debt to the government to finance the upgrade of the refinery and put up a liquified petroleum gas (LPG) facility. Following the upgrade, which is set to kick off in January, the refinery will be able to produce large quantities of high value white oil including domestic kerosene, petrol and aviation fuel as well as boost the refinery's LPG output to 115, 000 from 30, 000 metric tonnes. These are the products that have invited the interest of multinational players as demand for the products across the East Africa region rise. Shell has already placed its refinery interests including those of BP plc on the auction and is racing to close a deal before the end of the year. Should Libya oil pursue the deal, it is set to be locked in a bidding war with Indian oil giant Reliance Industries Limited which is said to be eyeing a stake in the refinery after it bought out Gapco Group, a regional oil marketer. If the two deals were to go ahead, it would place the twin oil firms in an enviable position of being among the few oil marketers in the local oil market controlling the entire supply chain from oil exploration to refineries to distribution of oil products. Both firms operate refineries in their home markets and the Mombasa plant would add to the stable of refineries. Reliance operates a 660, 000 barrels per day (bpd) refinery in the western Indian state of Gujarat and its subsidiary Reliance Petroleum is building a new 580, 000 bpd unit in India. Libya Oil, on the other hand, has its own exploration blocks and refineries in Libya. Already, both firms have on the cards ambitious plans to reinforce their presence in the local retail market that should give each a double digit share of the increasingly competitive market. Reliance Industries, on the strength of its acquisition of Gapco, is a small player in the Kenyan market, where it controls 1.85 per cent of the local market. However, it's a major player in Tanzanian and Ugandan markets where it controls an estimated 35 per cent and 12 per cent of the market respectively. Libya Oil, on the other hand, which has seen its market share drop from 10.8 per cent to 7.33 per cent in the six months to June, is planning to increase its holdings in the retail business as part of a broader turnaround of its local outfit. The Libyan firm, which made an entry into the local market last year after acquiring the assets of Exxon Mobil, is betting on its wide product offering and lower pricing to claim market share. "We plan to grow our market share to between 15 and 20 per cent in the next five years," said Mr Jarnaz. With the deep resources of the Libyan Government, which controls the firm through its investment arm, the local outfit has already put up a multi million shilling war chest to build visibility in the increasingly competitive oil market. |
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