The cost of upgrading East Africa’s sole petroleum refinery at Mombasa, Kenya could more than double to $1 billion, a company executive has said.
An executive with India-based Essar Energy PLC, which owns the refinery, said the upgrade cost was earlier estimated at $450 million, but it will require additional modernization to enable it process Ugandan crude once that country starts production.
“It could cost $1 billion dollars, a feasibility study is being conducted into the project,” the executive, who didn’t wish to be named, said on the sidelines of East African Petroleum Conference in Kampala.
Bimal K. Mukherju, chief executive of the plant’s refinery owner, Kenya Petroleum Refineries Ltd., said separately that Essar is planning to double capacity at Mombasa in the next five-to-six years, to 80,000 barrels a day from the current 40,000 barrels a day.
Essar acquired a 50% stake in the refinery in 2009 and announced it would invest $400 million-$450 million to modernize the plant, which supplies refined fuel products to Kenya, Uganda, Burundi and Rwanda.
Mukherju further said Essar executives are in Uganda to look at more investment opportunities following the discovery of commercial oil in Uganda’s Lake Albertine rift.
“Ugandan crude is waxy but is of an excellent quality, we are looking at the opportunity of processing it” he said adding the main challenge will be how it can be delivered by pipeline to the East African coast. Because of its waxy nature it would require a heated pipeline to prevent it from solidifying during transportation.
Mukherju further said the current demand in the region, estimated at 200,000 barrels a day, is enough to support a second refinery, which is being planned in Uganda.
