viability of small refineries: kenyan perspective presentation to: unctad 11 th africa oil &...
TRANSCRIPT
KP R
L
Viability of Small Refineries: Kenyan Perspective
Presentation to:UNCTAD
11th Africa Oil & Gas, Trade and Finance ConferenceNairobi Kenya
ByJohn Mruttu
General Manager24th MAY 2007
NOT AN OFFICIAL UNCTAD RECORD
contents
1. Current configuration.
2. Constraints & search for alternatives
3. Proposed investment proposals and impact
4. Viability of small refineries: our experience and key enablers.
Where We AreYou are hereSomaliaEthiopiaSudanAustraliaTanzaniaUgandaNyaliLikoniIndian OceanTo NairobiTo Malindi M
ombasa
KPRL BOARD 4 Directors GoK appointed, 4 Directors appointed by Industry
Refinery Customers Processing Agreements
KPRL
CORPORATE STRUCTURE
GoK 50% Shell 17.1% BP 17.1% Chevron 15.8%
Our Capacity
Plant Year Capacity
CDU1 1963 5,500 t/d
CDU2 1974 3,600 t/d
HDT1 1963 2,200 t/d
HDT2 1974 1,100 t/d
Kero HDT 1974 800 t/d
Platformer 1 1963 450 t/d @ 95RON
Platformer 2 1974 600 t/d @ 95 RON
Bitumen 1963 135 t/d
Grease 1970 8 t/d
hydrotreater petrol
gas
DPK
Diesel
Fuel Oil
reformer
Existing configuration
Competitive constraints
Hydro skimming configuration.– High yield of residue – Lack of residue conversion facilities results in poor refining economics
No sulphur removal capability for diesel.– Diesel will not meet low sulphur specifications in line with international
trends.
Dependant on light & sweet crude oils.– Relatively expensive– Light crude- US$60 per barrel, heavy crude: US$53 per barrel (FOB)– After upgrading heavy crude oils will be the primary raw material
Frequent power interruptions resulting in under utilization and reduction in processing efficiency
Search for options
Ministry of Energy Study on KPRL conducted by KBC Process Technology May 2004, main conclusions:
In its current configuration the refinery requires support to remain viable.
Investment is required to secure a competitive position and meet product specifications.
Upgrading the refinery is more beneficial than product import terminal.
Thermal Gas Oil Unit recommended for residue conversion.
hydrotreater petrol
gas
reformer
DPK
Diesel
Fuel Oil
Thermal gasoil unit
Diesel treater
hysomer
proposed configuration
cost estimates of investment proposals
Thermal Gas oil unit (TGU) for residue conversion combined with 35MW gas turbine in a combined cycle
US$300 m
Diesel Hydrotreater- sulphur removal
Tops Isomerization-unleaded Petrol production
Sulphur recovery and water treatment facilities
LPG handling and import facilities
Total US$300 m
Crude slate & product yield
Current operation Upgrade operation
Light crude 80% 40%
Heavy crude 20% 60%
White product yield
63% 72%
Residue yield 37% 28%
VALUE ADDITION
KP R
L
Added Value
39.2 MUSD/a
Current Fuel Oil demand Future Fuel Oil demand
0
500000
1000000
1500000
2000000
2500000
3000000
1.6 Mt/a CurrentConfiguration
1.6 Mt/a TGUConversion & Clean
Fuels
2.2 Mt/a TGUConversion & Clean
Fuels
3.2 Mt/a TGUConversion & Clean
Fuels
To
ns/a
LPG
MOGAS
KERO
AGO
FUEL OIL
Project economics-
KPRL Equity Returns Refinery Upgrade
LPG Storage Facilities
After tax Rate of Return
28% 18%
Payback period (years)
6.5 8.5
Potential Sources of funds
several financial institutions including local banks, foreign banks, export-credit agencies have indicated willingness to finance the investment.
However, the maximum borrowing is 70% of estimated costs. 30% equity contribution is required.
Viability of small Refineries: our experience
Financial benefits.– Least cost option for product supply in the country. – Attractive return on investments
Alternative supply routes– Ability to exploit emerging sources of crude oil in the region thus
diversifying supply routes and hence improving the security of supply.
Social benefits– Creation of 300 jobs during construction period and another 100 jobs
during operation.– Distribution of wealth to approx 1000 families– increased supply of LPG at reduced cost in the country with the
associated health and environmental benefits.– Technology transfer and manpower development
Viability of small refineries: key enablers
Strong domestic demand; offshore export market more difficult.
Residue conversion: hydro-skimming will not work. Convergence of Product specifications: negotiate for
phased (timing) approach Financial viability should not be the only criteria:
– Social benefits count as much.– Emissions. What is cost to the environment when Africa
exports crude oil to another continent and imports finished products?
Way Forward for KPRL Government of Kenya’s support for the
proposals to upgrade the Refinery has been announced.
The Company has been mandated by the Board to: – Update the cost estimates– Progress the development of options for
project financing (equity & debt)
THANK YOU