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Kenya refinery buys crude for itself

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MOMBASA, Kenya – Kenya’s only refinery will on Saturday receive its first direct purchase of oil, 82,000 tonnes of UAE Murban crude, its chief executive told Reuters on Friday. Until now, only fuel marketing companies have been importing crude and paying processing fees to the Mombasa refinery, which is owned by the Kenyan government and […]

MOMBASA, Kenya – Kenya’s only refinery will on Saturday receive its first direct purchase of oil, 82,000 tonnes of UAE Murban crude, its chief executive told Reuters on Friday.

Until now, only fuel marketing companies have been importing crude and paying processing fees to the Mombasa refinery, which is owned by the Kenyan government and India’s Essar Energy.

The Kenya Petroleum Refineries Limited plant will add another competitor to Kenya’s existing fuel marketers, which may help ease fuel shortages and high pump prices in east Africa’s biggest economy, Brij Mohan Bansal said in an interview.

Bansal said the refinery can source cheaper crude without restricting itself to a specific mix, and may even buy blended crude to lower import costs.

“The exercise has already started, and we expect the processing of this crude to start somewhere around the first week of August 2012,” Bansal told Reuters.

“We are in discussion with marketing companies to finalise the details of our engagements with them. We will import, process and sell the refined products to them, as we continue our processing of oil at a fee,” he added.

In June, the refinery which processes 1.6 million tonnes of crude a year, signed a $250 million credit line from Standard Chartered Bank to finance crude imports.

Its first independent purchase of crude was loaded at the port of Jebel Dhana in Abu Dhabi at a cost of $65 million.

Two more ships, Bansal said, all of the same quantity, value and origin were expected to follow in August and September.

“Gradually we would like to optimize on the crude mix, to find out which crude suits the refinery best,” Bansal said.

“We will see in the market which crude is cheaper and which crude gives the maximum net worth value to the refinery, and that which will directly benefit the refinery and the economy.”

Kenya has imported Murban crude from Abu Dhabi and Saudi Arabia’s Arabian Heavy and Medium crude grades through an open tender system (OTS).

Fuel prices in the country have fallen sharply after crude fell on global markets, signalling a drop in inflation in the coming months.

Kenya’s electricity distributor, Kenya Power on Thursday said that it would reduce electricity tariffs by 10 percent this year, due to reduced fuel prices.