Petroleum refinery to buy its crude in September

THE Kenya Petroleum Refinery expects to buy 80,000 tonnes of UAE Murban crude oil in September as it speeds up its processing rate under a new system in which it sells the refined products itself, its chief executive said.
Until recently, only fuel marketing companies could import crude, and the Mombasa refinery, which is owned by the Kenyan government and India's Essar Energy, had earned fees for processing it. The refinery's recent shift to merchant mode, buying crude and selling the fuel itself, is expected to lower retail fuel prices across the east African region.
Last month and in early August, in its first shipments since it began operating under merchant mode, the refinery paid $140 million to receive 160,000 tonnes of crude from Abu Dhabi.
The refinery, which processes 1.6 million tonnes of crude a year, so far has processed 35,000 tonnes of this crude, at an average of 20,000 tonnes per week, but this rate is expected to double, Brij Mohan Bansal, its chief executive, said in an interview. "We had logistical challenges in starting, because this is a new system. That's why we delayed the start of processing, but we are now up and running," he added.
Another tanker carrying 80,000 tonnes is expected to dock at the port of Mombasa in mid-September, he said. The refinery, Bansal said, is negotiating with banks for an increase in working capital loans to help sustain the new system.
In June, the refinery obtained a $250 million credit line from Standard Chartered Bank to finance its crude imports. "Given our capital needs, we are currently discussing with other banks to increase working capital loans to $400 million," Bansal said.
He said the refiner also faced hurdles including insufficient storage, stock management and pricing issues. "We have started importing our own crude. The marketers who have been importing are still doing it. This means our storage facilities are getting strained," he said, adding that the refiner was in talks with marketers around the region to sort out the problem.
"We presented to our board a proposal for expansion and modernization of the entire refinery. We await approval, and once it is done, we will have settled all these (storage issues)."
Source: The Star