Essar Oil edges out RIL, BPCL in race for Kenyan refinery
The acquisition of the refinery, located in the coastal city of Mombassa, is expected to give Essar Oil a global footprint.
By Piyush Pandey, TNN |
DHANBAD: Essar Oil (EOL) is believed to be very close to sealing a deal to acquire a majority stake in Kenya Petroleum Refinery (KPRL), one of Kenya’s oldest refinery complexes with a capacity of four million tonnes. India’s largest oil company by market capitalisation, Reliance Industries (RIL) and state-owned refiner Bharat Petroleum Corporation (BPCL) were also in the race to acquire the 50% stake held by Chevron, Royal Dutch/Shell and British Petroleum (BP), it is learnt. The remaining 50% is held by the Kenyan government.
A source close to developments said, “The deal is likely to be announced within a week.” The size of the acquisition, however, could not be ascertained. EOL has been trying to gain a foothold in the African oil refining business for the past three years, with little success so far.
The acquisition of the refinery, located in the coastal city of Mombassa, is expected to give Essar Oil a global footprint that would diversify its market. In the upstream oil exploration business, the company already has three exploration and production (E&P) blocks in Madagascar and one block in Nigeria.
When asked for comments, an Essar spokesperson said, “We will continue to look for growth in all the sectors we are present in. As a corporate policy we would not like to talk about any such proposal.” Essar Oil’s earlier bid for the Port Harcourt refineries in Nigeria also did not bear fruition, as the refineries were finally bought by a local African consortium.
RIL has been interested in the KPRL refinery, in order to obtain a fuel source for the retail outlets of oil marketing company GAPCO, in which it recently acquired a majority stake. RIL wanted to make this acquisition through its wholly-owned subsidiary, Reliance Industries Middle East, a company registered in the UAE.
Public sector refiner/marketer BPCL is setting up an LPG distribution system in Kenya. BPCL had plans to upgrade the project to 6 mmtpa and build a hydrocracker unit, according to a senior company official.
According to an analyst with an international firm based in Mumbai, “Essar’s upstream assets in Africa, followed by the acquisition of a refinery, point towards the next logical step for Essar, which is to set up or buy petro retail operations. Buying a refinery in Kenya will help the company grow in east African countries like Tanzania, Kenya, Uganda and Sudan. Unlike India, Kenya is a net importer of refined petroleum products.”
Analysts also say it makes sense for Indian firms to move into African markets, as the Indian market is now saturated. Essar, RIL and BPCL, all are making losses in the retail petroleum business here because of the cap on sale prices by the government. The Kenyan market is unregulated. The operational costs of the Indian companies are far lower compared to multinationals like Chevron and Shell, who are operating there.
A source close to developments said, “The deal is likely to be announced within a week.” The size of the acquisition, however, could not be ascertained. EOL has been trying to gain a foothold in the African oil refining business for the past three years, with little success so far.
The acquisition of the refinery, located in the coastal city of Mombassa, is expected to give Essar Oil a global footprint that would diversify its market. In the upstream oil exploration business, the company already has three exploration and production (E&P) blocks in Madagascar and one block in Nigeria.
When asked for comments, an Essar spokesperson said, “We will continue to look for growth in all the sectors we are present in. As a corporate policy we would not like to talk about any such proposal.” Essar Oil’s earlier bid for the Port Harcourt refineries in Nigeria also did not bear fruition, as the refineries were finally bought by a local African consortium.
RIL has been interested in the KPRL refinery, in order to obtain a fuel source for the retail outlets of oil marketing company GAPCO, in which it recently acquired a majority stake. RIL wanted to make this acquisition through its wholly-owned subsidiary, Reliance Industries Middle East, a company registered in the UAE.
Public sector refiner/marketer BPCL is setting up an LPG distribution system in Kenya. BPCL had plans to upgrade the project to 6 mmtpa and build a hydrocracker unit, according to a senior company official.
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According to an analyst with an international firm based in Mumbai, “Essar’s upstream assets in Africa, followed by the acquisition of a refinery, point towards the next logical step for Essar, which is to set up or buy petro retail operations. Buying a refinery in Kenya will help the company grow in east African countries like Tanzania, Kenya, Uganda and Sudan. Unlike India, Kenya is a net importer of refined petroleum products.”
Analysts also say it makes sense for Indian firms to move into African markets, as the Indian market is now saturated. Essar, RIL and BPCL, all are making losses in the retail petroleum business here because of the cap on sale prices by the government. The Kenyan market is unregulated. The operational costs of the Indian companies are far lower compared to multinationals like Chevron and Shell, who are operating there.
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