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Migration to Merchant Mode
Kenya Petroleum Refineries Ltd. has been operating as a tolling refinery since its inception in 1960. In order to improve the sector supply chain, a Task Force on the Petroleum Industry of Kenya was constituted by the Office of the Prime Minister in May 2011; it made recommendations to convert Kenya Petroleum Refineries Ltd from a tolling to a merchant refinery
On 20 June 2012, in Nairobi, KPRL signed a financing agreement with the Standard Chartered Bank Plc to enable the Refinery to roll out its business transformation plan. The signing of the financing agreement will enable KPRL to access US$250 Million to transform from a toll refinery to a merchant refinery.
“This facility will be utilised for our working capital requirements. We will now be able to procure oil, process it and sell the Petroleum Products to Marketing Companies” Mr Bansal said.
Following the agreement KPRL will be able to source for more economical crude oils or crude oil blends from other non-traditional sources.
The refinery currently processes 1.6 million metric tons of crude oil per annum. With this transition, it would not only process the Murban crude from Abu Dhabi, in the United Arab Emirates (UAE), but it will be capable of handling crude oil from cheaper sources.
Unlike the existing system where the refinery receives crude oil from the OMC, the change to a merchant refinery would enable KPRL to purchase its own crude oil.
The refinery will continue to focus on servicing the Kenyan main market which is the most dominant in the region. Kenya has a demand of about 4 million cubic meters per year.
Mr. Bansal said the signing of the agreement is expected to bring significant benefits to local consumers due to the enhanced efficiency in procurement of Crude oil.
“We are doing the best for the economy. The economy will benefit from this enhanced efficiency because we would be able to buy from the best-suited crude oil suppliers,” Mr. Bansal reiterated.
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