Essar Oil becomes partner in Kenyan refinery

The Kenyan government has approved a year-old offer from Essar Oil & Gas Ltd., Mumbai, to buy a 50% stake in Kenya Petroleum Refineries Ltd.

Mar 30th, 2009

Uchenna Izundu
OGJ International Editor

LONDON, Mar. 30 -- The Kenyan government has approved a year-old offer from Essar Oil & Gas Ltd., Mumbai, to buy a 50% stake in Kenya Petroleum Refineries Ltd.

Kenya's only refinery, the 4 million tonne/year complex in Mombasa produces LPG, gasoline, diesel, kerosene, and fuel oil. It is to undergo an upgrade by adding secondary units that were estimated to cost $400-450 million.

The deal was expected to close in early 2008, subject to approval by the government, which holds the other 50%. It waived its pre-emptive right to allow Essar to acquire the share in the refinery from partners Shell Petroleum Co. Ltd., Chevron Global Energy Inc., and BP Africa Ltd.

Kenya's Energy Minister, Kiraitu Murungi, said: "The new Minister for Finance [Uhuru Kenyatta] has decided that the original arrangement of the private companies proceed, and Treasury is currently negotiating with Essar."

Talks between the government and Essar Oil now focus on the structure of the board and management, how they will pay for the upgrade, and pull out of the company in the future.

Contact Uchenna Izundu at uchennai@pennwell.com

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