Essar Energy Overseas Limited announced the completion of acquisition of 50% stake from Shell, BP and Chevron in Kenya Petroleum Refineries Ltd (KPRL). The Government of Kenya holds the remaining 50% stake in the company. KPRL is a 4 million metric tonne (MMTPA) per annum refinery in Mombasa, Kenya.
This acquisition marks Essar’s foray in overseas refining market and is a step towards realising its vision of a global refining capacity of 1 million barrels per day.
Essar Oil is currently operating a 280000 bpd refinery in India. This capacity is being expanded to 320000 bpd by 2010 and then to 7,00,000 bpd by 2011.
Commenting on the acquisition, Mr Shashi Ruia, Chairman, Essar Group said, “This is an excellent addition to our oil assets and fits well with the Group’s strategy of building and becoming a global oil and gas player. This will further enhance our presence in the growing African market”.
The Mombasa refinery is the only refinery in Eastern Africa. It currently produces LPG, gasoline, diesel, kerosene and fuel oil. The refinery is planned to be upgraded by adding secondary units at a project cost of USD 400- 450 million.
With this acquisition, Essar expects to play a major and vital role in the African oil and gas markets. KPRL’s products are sold into the Kenyan market and exported to neighbouring countries including Tanzania, Uganda, Burundi and Rwanda. Demand for petroleum products in these markets is estimated at 5 million tonnes per annum.
Essar’s African Interests
Essar has operates a GSM telephony license in Kenya under the brand “yu”. It launched GSM service in October 2008 and is regarded as one of the most innovative and fast growing telecom operators in Kenya. The company already has approx. 400,000 subscribers on its network in Nairobi and Mombasa and it expects this number to grow significantly as it completes it roll out across Kenya by end of the year. Essar is building an East Africa telecom play and therefore would be looking at launching telcom operations into other East African countries.
Speaking on the acquisition, Mr Prashant Ruia, Group Chief Executive, Essar Group said, “It is a moment of pride for us today as we signed and concluded this acquisition. The acquisition is part of a two-pronged strategy-that of enhancing our global footprint as well as realizing our dream of a refining capacity of 1 million barrels per day. I am hopeful that in addition to the Kenyan market, we will be able to substantially add value to other global markets as well with our products. We are extremely obliged and thankful to the Government of Kenya for their support and look forward on working with them to make KPRL a global market leader”.
Mr John Mruttu, General Manager, KRPL said, “The entry of Essar is a major milestone that will allow KPRL with the support of the two shareholders (GoK and Essar) to embark on the path of modernization and growth as it seeks to meet the national and regional demand for petroleum products. Investment in new processing units that will improve the processing efficiency of the refinery and advance its competitive position in the market is expected to take place. I also wish to thank BP, Chevron and Shell for their contributions and support over the last 50 years”.