Kenya Pipeline Company Minimizes Threat from Uganda’s Planned Refinery
NAIROBI, Kenya – Kenya Pipeline Company (KPC), a key player in East Africa’s petroleum transport, has sought to allay concerns that Uganda’s ambitious $4 billion oil refinery project will significantly impact its regional business. Despite anxieties within the industry, KPC maintains the refinery poses no immediate threat to its operations or export volumes.
The planned refinery, located in Uganda’s Albertine Graben, is projected to process 60,000 barrels of crude oil daily upon completion, with operations anticipated between 2029 and 2030. The Uganda National Oil Company will hold a 40% stake, with the remaining shares controlled by Alpha MBM Investments LLC.
Currently, Uganda relies heavily on imported refined petroleum products – spending approximately $2 billion (Sh258 billion) annually – the majority of which transit through Kenya’s pipeline and port infrastructure. This dependence has fueled concerns that the refinery could curtail Uganda’s need for Kenyan transit services, potentially hindering KPC’s regional expansion plans, including the proposed Eldoret–Kampala–Kigali refined petroleum products pipeline.
However, KPC Managing Director Joe Sang dismissed these fears during a recent media briefing in Nairobi, coinciding with the company’s Initial Public Offer (IPO). “Uganda refinery is not a threat. It will take up to 15 years for Uganda to start refining oil,” Sang stated.
KPC is currently divesting government-owned shares, offering 11.81 billion ordinary shares at Sh9 per share, representing a 65% ownership stake. The IPO information memorandum details plans to finance future investments through a combination of internally generated funds, debt capital markets, special purpose vehicles, joint ventures, and strategic partnerships.
The company revealed that roughly 90% of its refined petroleum throughput – estimated at 2.5 billion litres annually – is currently exported to Uganda, making it KPC’s largest transit market. This statistic underscores the significant role Uganda plays in KPC’s revenue stream.
Despite Uganda’s refining ambitions, KPC expressed confidence that the landlocked nation will continue to import refined petroleum products for the foreseeable future. The company argues that global oil markets are fully integrated, meaning competition is based on production efficiency and scale economics, rather than regional boundaries.
“Even when refining capacity becomes a reality, world oil markets are fully integrated. There are no regional oil markets; all oil competes globally based on production efficiency and scale economics,” KPC stated.
Furthermore, KPC contends that Eastern Africa’s current consumption levels are insufficient to justify large-scale crude oil refining at competitive margins. The company believes refined petroleum imports will remain a crucial component of the region’s energy mix for years to come.
This assessment aligns with broader industry trends. According to the International Energy Agency (IEA), Africa’s overall oil demand is projected to rise in the coming decades, driven by population growth and economic development, but refining capacity will likely struggle to keep pace, necessitating continued reliance on imports. https://www.iea.org/reports/africa-energy-outlook-2022
The KPC’s IPO is being closely watched by investors as a key indicator of the company’s future growth potential in a rapidly evolving East African energy landscape. The success of the offering will be crucial for funding KPC’s expansion plans and maintaining its position as a regional leader in petroleum infrastructure.
