Taxpayers may have to wait longer for Kisumu oil jetty to start operations and make the desired returns on the Sh1.9 billion the government sank in more than a year ago.
Extended delays appear imminent even after Uganda announced it would complete its side of the jetty in two months.
Officials attribute the delay to compliance requirements.
Kenya has also thrown the plan into a spin with the decision to revamp the metre gauge railway line to Uganda, which may tilt marketers’ preference over Lake Victoria.
Kenya Pipeline Company acting managing director Hudson Andambi told the Sunday Nation that while the Ugandan jetty could be ready by July, compliance processes and the availability of vessels to transport the oil may take longer.
“We need 4.2 million-litre barges (flat-bottomed ships) to ferry the products. Such a ship cannot be built in two months. We should also get compliance licences and the environmental impact assessments must be done before operations begin,” Mr Andambi said.
“The contractor for the Ugandan jetty is expected to provide the barges and I cannot speak for the firm”.
Uganda Minister for Works and Transport Monica Azuba said on Wednesday that the Entebbe jetty would be ready by July.
The jetty was built through a public-private partnership arrangement.
The Kenyan one, which was built by KPC, has been controversial from the start.
Several KPC managers have stepped aside after questions were raised about the cost of the project.
The KPC board has questioned the extra Sh500 million the National Treasury approved for the jetty, insisting that it should have cost Sh1.4 billion.
Uganda has been quiet on the 2013 ground-breaking ceremony of the project.
KPC board briefings tell of visits to Kampala last year with minimal hopes that oil transit across the lake would start soon.
“Generally, the vessels and receiving jetties are not immediately available to support the use of the Kisumu oil jetty,” a March 2018 briefing to the board read.
One of the two vessels in Kenya is an old Kenya Railway ship that has not been operational for a decade.
MV Uhuru needs to be rehabilitated and modified for jetty loading.
A smaller one with 750 cubic metre capacity is said to be the only available option. The contractor in Uganda says one vessel is still being fabricated in China.
Ms Azuba said Kampala is rehabilitating its long abandoned rail tracks and wagons which would be critical in ferrying petroleum products inland.
With the plan to revive the Naivasha-Malaba metre-gauge railway line, Kenya may also be shooting itself in the foot as Uganda will be reluctant to fight lake compliance headwinds if a cheaper option is available.
Another challenge flagged by KPC was the tariff.
Vessel owners want $30 per 100 litres transported across the lake.
This, added to the $2.2 per cubic metre that KPC plans to charge as loading fee would make the project more expensive than the road alternative.
“The average Mombasa-Kampala road tariff would remain cheaper by $10.6 per cubic metre. To achieve a shift from road to lake transport, the combined jetty and vessels, as well as port charges, would have to be significantly cheaper. The stakeholders would have to ensure this competitiveness is achieved,” says a project assessment report seen by the Sunday Nation.
A further delay in the use of the jetty may also render it moribund as Uganda’s 60,000 barrels per day oil refinery nears completion.
Italian and American investors contracted to design, finance, construct and operate the project are said to be making significant progress.
The project will tilt the regional fuel business, with Kenya expected to feel the heat.
at a loss since Uganda remains a key market for fuel export due to its land locked location.
Kenyan Business Feed is the top Kenyan Business Blog. We share news from Kenya and across the region. To contact us with any alert, please email us to editor@kenyanbusinessfeed.com
