Kenya’s Mombasa-based oil refinery requires $40 million to become a merchant plant importing its own crude for processing with products being sold at a profit.

Kenya Petroleum Refineries Ltd (KPRL) currently operates as a toll refinery charging marketers a fee for processing of crude imported under competitive tender by one company for the entire industry.

“ The Banks are willing to lend KPRL $40 million to import crude oil. The rate of changing to a merchant refinery also depends on how quick government comes up with new regulations on the situation,” he said.

KPRL, the only refinery in East Africa has not been modernised for many years.

Tanzania closed its refinery in the 1990s and Uganda has not started building a plant to process its newly discovered crude oil.

KPRL’s distillation unit II commissioned in 1974 and distillation unit 1 launched in 1963, have a combined crude oil processing capacity of 8,000 tonnes per day. The fuel is used in Kenya and the East African region.

A status change for KPRL requires procuring crude oil from a cheapest seller with refined fuel being sold to marketers at a profit margin.

This entails setting up of a raw material buying desk and marketing wings.

Therefore, quick access to $40 million to finance buying of crude oil is at the core.

Industry players who asked not be named said KPRL is likely to ask for some protection to remain profitable, requiring the Energy Regulatory Commission (ERC) and Ministry of Energy to work on new rules.