The Midstream Sector incorporates petroleum supply, storage, refining and distribution. As petroleum products are essential requirements for the development of the country’s economy, sufficient infrastructure systems are vital to ensure adequate, reliable and cost-effective supply of petroleum products. The increase in local and regional demand for petroleum products however has not been matched by the development of the infrastructure to match/meet supply chain and market requirements.

Storage Facilities

Refined petroleum products are off-loaded at the Kipevu Oil Terminal (KOT) into the Kipevu Oil Storage Facility (KOSF). KOT handles 90% of the country’s imports. The KOSF has a storage capacity of 326 million litres and an operational capacity of 269 million litres which does not meet the regional demand of 500 million litres per month.

This capacity is further constrained by low product evacuation at Nairobi and low flow rate on Nairobi to Western Kenya pipeline. Similarly frequent rehabilitation of aged tanks results to ullage constraints and lack of operational flexibility. But these challenges will be alleviated through construction of an additional jetty to handle super-tankers as well as dredging of the Kilindini Channel to improve on the current drift/draft and construction of additional storage for both LPG and refined products. In addition, there are plans to construct additional storage along the pipeline network as demand dictates.

A smaller jetty at Shimanzi Oil Terminal (SOT) is operated by the oil marketers for import and export/re-export of refined petroleum products. Most of the products imported through SOT are evacuated by road, while some, especially for Uganda, are transported by rail. The Kenya Ports Authority’s (KPA) long-term plan is to stop using SOT for handling petroleum fuels.

Strategic Reserves

Kenya has remained without petroleum strategic stocks for sometime which are critical in cushioning the country against both onshore and offshore supply chain disruptions that provide short-term consumer price stability. Through the legal Gazette Notice No.43 of April 2008, the Energy (Petroleum Strategic Stock) Regulations, 2008 the Government provided for the establishment of strategic stocks equivalent to 90 days consumption. However, this has not yet materialised and there is a proposal that Petroleum Development Levy (PDL) be enhanced to fund reserves.

Based on August 2011 estimates, KShs. 30.8 billion will be required to develop the strategic reserves storage facilities and a further KShs. 91.6 billion to produce the strategic stocks which will result in upward adjustments of PDL by about KShs. 2.00. Kenya Pipeline Company has been mandated to develop the infrastructure, whereas NOCK will procure and manage the strategic stock. NOCK is currently undertaking a feasibility study for development of national petroleum strategic reserves, the results of which will determine the most optimum way of financing the infrastructure and stocks.

Petroleum Refining

The Mombasa-Kenya Petroleum Refineries Limited (KPRL) was the only refinery in East Africa. At one point, the facility was jointly owned by the Kenya Government and Essar Energy of India. Until its closure in September 2014 following Essar’s pullout, it used to refine 40% of all petroleum products requirements in the country. Its name plate capacity is for 4 Million MT per annum but was operating 1.6 Million MT of crude per year, producing Premium Motor Spirit (PMS), Regular Motor Spirit (RMS), Automotive Gas Oil (AGO), Dual Purpose Kerosene (DPK), Liquefied Petroleum Gas (LPG), Fuel Oil Grease and Bitumen.

Challenges that KPRL faced include frequent electrical power interruptions; overstretching the platformer units beyond the design limit in an attempt to comply with the switch from leaded to unleaded gasoline; higher than normal fuel and performance loss because of top recirculation and power interruptions and breakdowns; diesel sulphur specification restriction imposed world-wide for cleaner environment; reliance on electrical power provided by KPLC; inability to deliver products on time due to power interruptions and lack of adequate water supply.

Following closure of the facility, attention turned to alternatives ways of using the refinery including potentially converting it into a storage facility to meet the challenge of inadequate storage for strategic and operational stocks in the country.

Modernising the refinery was the other option. A more viable, modernised facility would produce more competitive products, create jobs and in the event of oil discovery in the region, be a strategic asset for processing such crude oil. The Government has also finalised plans to build another refinery in Lamu and under Lamu Port and Lamu South Sudan Ethiopia Transport Corridor (LAPSSET).

Petroleum Transportation Pipeline

Kenya currently has a pipeline network of approximately 1100km operated by the Kenya Pipeline Company Limited (KPC) for refined products that runs across the country from the coastal town of Mombasa via Nairobi to Eldoret and Kisumu in Western Kenya. The network serves the local market as well as the neighbouring countries.

The pipeline system, which is connected to the Kipevu Oil Storage Facility (KOSF), is an important handling facility for petroleum products. The current pumping capacity for the Mombasa-Nairobi pipeline has been enhanced from 440,000 to 830,000 litres per hour. A 14-inch diameter parallel pipeline was constructed from Nairobi to Eldoret to boost the supply of petroleum products to Western Kenya. This is expected to reduce transportation of petroleum products by road.

pipeline

Finished Petroleum Products Pipeline under Construction

There are plans to extend the pipeline from Eldoret to Kampala, Uganda under the Kenya-Uganda Petroleum Products Pipeline Extension Project that is being developed jointly by the two States. KPC also has plans to establish points to establish points of presence in Nanyuki, Taveta and Konza. The pipeline will be extended to these points and additional storage facilities will be constructed.

The pipeline will be further extended from Nakuru to Isiolo via Nanyuki to serve the Central and Northern parts of the country and the neighbouring countries. Major challenges in pipeline transportation is the low pipeline capacity constraints between Nairobi and Western Kenya depots and utilisation of KPC system as storage/trading tool instead of supply system.

kpc-tanks

Kenya Pipeline Petroleum Storage Tanks

The existing Mombasa-Nairobi refined oil products pipeline is old and inadequate to transport adequate oil supplies to Kenya and other hinterland regions, hence the planned construction of 452Km-20 inch diameter Mombasa-Nairobi refined petroleum pipeline (Line 5).         The petroleum storage capacity in Nairobi is also set to increase with construction of 33,366 cubic metres of additional storage facilities at the Nairobi KPC storage terminal as well as additional Jet A-1 tanks/depot at JKIA to match the needs for the expanding airport.

  1. Rail

Currently, only about 1% of petroleum products are transported by rail from Mombasa because the Kenya Railways Corporation and its concessionaires Rift Valley Railways do not have adequate wagons. However, railway transportation is a much safer mode of transport than road due to potential risks involved especially in LPG handling coupled with the construction of the roads. Transport by rail is mostly for fuel oil. The rail transport system therefore, needs to be improved in order to increase the percentage of petroleum products being handled by this mode of transport. KPC should venture into rail transport by acquiring wagons for the transportation of the heavy fuels which cannot be commercially transported through pipeline.

  1. Road

Road transport is used to move petroleum products from various depots that are spread across the major towns of Mombasa, Nairobi, Nakuru, Eldoret and Kisumu, to the respective towns and their environs. The use of road transport for petroleum products is expected to go down drastically once the entire pipeline capacity is enhanced as planned.

However, road transport will continue to play a key role in distribution of products from the KPC depots to the consumers thus requiring the need to have a good and well maintained road system.