President Uhuru Kenyatta is expected to inspect the progress of the new Kipevu Oil Terminal (KOT) under construction at Mombasa Port today.
It comes as the Kenya Ports Authority (KPA) prepares for the completion of the 40 billion shillings facility, which is expected to ease the process of importing petroleum products.
The new terminal, which has multiple berths, will reduce freight costs for fuel importers while reducing penalties imposed by shipowners for delays in unloading product once it arrives at port.
President Kenyatta will be accompanied by Wang Yi, State Councilor and Minister of Foreign Affairs of the People’s Republic of China, who is on a four-day visit to several African countries.
KPA said in a statement that the facility, which is located opposite the old oil terminal, consists of an offshore island terminal with four berths with a total length of 770 meters and a quay for work boats in the Westmont area for disembarkation facilities.
“When completed, the new oil terminal will have four berths, capable of handling six different hydrocarbon import and export products,” KPA Acting Managing Director John Mwangemi said.
“It is also equipped with a liquefied petroleum gas (LPG), crude oil and heavy fuel oil installation. It also contains provisions for the treatment of three types of white petroleum products (aviation fuel, diesel and gasoline).
The terminal will initially be able to simultaneously accommodate three ships with a capacity of 200,000 tonnes each.
“A fourth berth has already been provisionally built, which will in future be equipped with demand-specific facilities to accommodate a fourth vessel,” said Mwangemi.
The terminal is served by five subsea pipelines, buried 26 meters below the seabed to allow future dredging of the canal without interfering with the pipelines.
The terminal is funded by KPA and built by China Communication Construction Company. It will replace the first KOT which was built in 1963 to service the East African oil refinery, which later became Kenya Petroleum Refineries Limited (KPRL).
The old terminal has a single jetty and can only accommodate one ship.
KPA said the new terminal would improve the importation of petroleum products, reducing vessel turnaround time from four days to two days and in turn reduce demurrage charges.
Demurrage is a penalty that ship owners charge importers of goods for making their ships wait past the agreed time. This is generally passed on to consumers and is taken into account in the cost of unloading petroleum products.
Due to the limited unloading facilities at the current oil terminal where a single vessel can unload, demurrage has been a recurring problem for importers and is partly responsible for the high cost of fuel.
In a report to the National Assembly following an investigation into the high cost of fuel, the Finance and National Planning Committee said various ship owners received 1.3 billion shillings in demurrage between January and August 2021.
Information on payments made to shipping companies was provided by various state oil industry agencies during the investigation.
The committee noted that a ship can earn up to 4.5 million shillings per day while waiting to unload petroleum products.
According to KPA, the terminal will also reduce freight costs for oil importers due to improved cargo handling capabilities and the leverage effects associated with greater economies of scale.
Having an LPG unloading terminal will also promote the import of cooking gas, which should lead to lower costs for consumers.