Energy, Utilities and Mining
We have divided the Energy, Utilities and Mining sector in Kenya into the following
sub sectors:
Petroleum
Electricity
Oil exploration
Mining
PricewaterhouseCoopers provides financial and tax advice to companies in the
Energy and Mining sector.
Petroleum
The main source of energy in Kenya is actually wood fuel, which accounts for
about 70% of all energy consumed. Petroleum and electricity currently account
for only 21% and 9%, respectively. The Government's sector-development priorities
include measures to shift the pattern of energy consumption towards modern forms
of energy (i.e. electricity and petroleum), in order to protect the environment
and to provide energy forms necessary for economic growth.
There is therefore great potential for growth in these other forms of energy.
The main players in the petroleum sector are:
- Various petroleum companies involved in the distribution of petroleum products.
There are about 7 main companies and a growing number of independent oil distribution
companies that have sprung up since the liberalisation of the sector;
- The Kenya Petroleum Refinery Limited (KPRL), which operates the only oil
refinery in the country, and
- The Kenya Pipeline Company Limited, which operates the pipeline that runs
from Mombasa to Nairobi, Kisumu and Eldoret. There are plans to extend the
pipeline to Uganda.
The petroleum sector was deregulated in late 1994 with the deregulation of
retail prices of petroleum products and of the importation of crude oil and
refined products. However, the sub-sector could not be fully deregulated mainly
because of the market’s dependence on KPRL for liquefied petroleum gas
(LPG), and the absence of a viable infrastructure for its importation. Therefore,
the Government requires oil companies to import and process crude oil through
the refinery to satisfy the requirements for LPG. Recently, the Government has
introduced an open tender system for the importation of crude to the refinery.
Under this system a tender for importation of crude is awarded to an individual
oil company, which then imports crude for the whole industry and supplies to
the other oil companies.
In the recent past, questions have been raised about KPRL’s commercial
viability and the plant’s inability to produce environmentally friendly
products — unleaded petrol and low sulphur diesel. Stakeholders are divided
on whether to shut down the plant in favour of processed imports or invest in
a more modern and efficient new plant. A consultative process has been launched
to determine the exact value of investment required to upgrade the refinery
and prevent closure. The Government has already given its commitment to phase
out unleaded gasoline in Kenya by December 2005.
PricewaterhouseCoopers provides professional services to all major oil distribution
companies in Kenya.
Electricity
Please refer to the “Utilities” section.
Oil exploration
Several oil exploration companies were involved in the exploration for oil
in Northern Kenya in the 1980’s and 1990’s, but they have all since
pulled out. Recently, a consortium led by Woodside of Australia has been involved
in offshore prospecting off the Kenyan coast and has already completed seismic
tests in two sectors.
The National Oil Corporation of Kenya is also involved in marketing some onshore
sectors.
Mining
There is relatively little mining activity in Kenya, compared to neighboring
countries. The only large scale mining operation in the country at the moment
is the Magadi Soda plant, which extracts deposits of soda ash from Lake Magadi.
Recently, the Government signed a fiscal agreement with Tiomin Kenya, a subsidiary
of Tiomin Resources of Canada, to allow the company to mine titanium deposits
in Kwale along Kenya’s southern coastline.
Plans are also underway to review the Mining Act, thus liberalising the sector
and allowing more players in the market.
