'NO MORE FAKE NEWS' says KPC as it issues a press release dubbed 'PURE TRUTH'

In a press statement dubbed as 'No more FAKE news' KPC explains the alleged corruption and inefficiencies that has been raised by corrupt media media outlets and paid blogs. Here is the press release by KPC

KPC-SETTING THE RECORD STRAIGHT

NEW MOMBASA-NAIROBI PIPELINE (Line 5)

Rationale for Line 5

1.    In 2013, KPC carried out a petroleum demand survey for the country with a view to project demands for Kenya and the region up to year 2044 to enable the Company compute the size of replacement for Line 1 between Mombasa and Nairobi. The February 2013 Petroleum Products Demand Projections Report by an independent consultant Shengli Engineering & Consulting Co. Ltd established that the annual petroleum demand  for Kenya in 2013 was 4 billion litres with projected demands of 5.7 billion litres in 2016 and 6.8 billion litres in 2020. This rise in demand was largely due to the country’s economic growth and that of the region.

On the other hand, the demand for the export market of Uganda, Rwanda and eastern Democratic Republic of Congo stood at 2.4 billion litres in 2010 but has since risen to 3.5 billion litres in 2016.

The choice of sizing (20 inch pipeline) was therefore informed by a study carried out by an independent expert consultant (Shengli Engineering & Consulting Co. Ltd) on the projected demand for petroleum products in Kenya and the region served by KPC.

At no time did KPC conceive laying a 16-inch pipeline between Mombasa and Nairobi.

2.    The Current Line 1 (Built in 1978) is 39 years old, and 14 years beyond its design life span.

3.    An in-line inspection carried out by NDT Middle East Co Ltd in 2010 indicated that it was not operationally and economically feasible to carry out repairs to the aging pipeline beyond 2014. This meant that Line 1 had to be replaced.

4.    It was not possible to replace the current line because that would require total shutdown of operations and this would have jeopardised fuel supply in the country and region. Replacement of Line 1 can only be done once line 5 is up and running.

5.    KPC already has parallel pipelines operating simultaneously on its other routes (Nairobi-Eldoret - Line 2 and Line 4; Kisumu-Sinendet,-Line 3 and 6) therefore the decision to build a parallel pipeline was not unusual, but informed by the Company’s operational requirements.  

The Line 5 Procurement Process

The procurement process was carried out in accordance with the provisions of Section 78-82 of the Public Procurement and Disposal Act 2005, between 1^st January 2013 when the Expression of Interest (EOI) was first advertised, and 1^st July 2014 when the contract was signed between KPC and Zakhem Ltd. This was a period of over one year, and NOT one day as alleged. During that period, the procurement process was investigated and cleared by the Public Procurement Oversight Authority.

The procurement process was unsuccessfully contested by 4 different parties. The courts consistently upheld the award to Zakhem. In particular, China Wu Yi unsuccessfully contested the award to Zakhem and Public Procurement Appeals Review Board (PPARB) directed that  an investigation by the relevant arms of government be carried out on  the conduct of China Wu Yi for tender malpractices.

In her ruling in High Court Petition No 173 of 2014; Rich Productions (K) Ltd –vs- KPC Ltd & PPOA delivered on 19^th June 2014, Lady Justice Mumbi Ngugi held that there was no merit in the challenge to the award of the Line 5 tender to Zakhem Ltd as KPC had complied with the provisions of the Public Procurement and Disposal Act, 2005.

Cost of Line 5

The contract sum is Kshs 48 Billion and NOT 53 Billion. The total cost of a new 20-inch, 450-km ultra-modern petroleum products pipeline (‘Line V’) from Mombasa to Nairobi is US$ 484 million, being partially funded with a US$ 350 million (70%) loan. The balance 30% of US$ 134 million of the project cost is being financed from KPC’s own financial resources. The funding was secured because the project is viable and met the ledors threshold requirements for funding.

The US$ 350 million facility  given to KPC by a consortium of banks  comprising CfC Stanbic Bank Limited, Citibank, N.A., [Kenya Branch], Commercial Bank of Africa Limited, Co-operative Bank Limited, FirstRand Bank Limited (London Branch), and Standard Chartered Bank is one of the largest commercial bank financings ever entered into by a Kenyan parastatal on a stand-alone basis and confirms KPC’s solid  financial standing and reputation; and to the ability of Kenyan-based banks to arrange complex financing deals.

The loan carries highly competitive terms: it is for 10 years, and bears a margin of 5.38% over LIBOR, comparable, at present LIBOR rates, to the  financing costs on the recent Kenya Government US$ 2 billion Eurobond issue.

KPC contracted in USD and borrowed funding for the construction and is thus insulated from currency fluctuations. For the record, KPC previously borrowed Kshs 8.2 Billion for the Nairobi – Eldoret (Line 4) capacity enhancement project, which sum was repaid within 2 years after the project was completed, and 5 years earlier than the contracted loan tenure.

Money Paid out to Zakhem International Limited

No money has been lost. As at 28^th March 2017, KPC has paid 75.6% of the contract sum amounting to Kshs 34 billion against certified completed work of 82%.

KPC ‘s financiers release the funds directly to the contractor upon receipt of documents certifying work done.

The project is now 82% complete.

The Future of Line 1

In view of the demand for petroleum products in the region which  grows by 8% per annum,   and in line with KPC’s strategy of devolving the pipeline to move the product closer to Wanjiku, KPC shall continue rehabilitating the existing Line 1  and run it as a parallel line as with the other sections of the pipeline network such as Nairobi-Eldoret; and Sinendet-Kisumu.

Capacity Enhancement Pumps

The capacity enhancement project of 2009-2010 that saw new pumps fitted in Samburu (PS 2), Manyani (PS 4), Makindu (PS, 6), and Konza (PS 8), was intended to increase pumping capacity and flow rate for Line 1 from 440m³ per hour to 880m³ per hour, and reduce product stock-outs which had become rampant in the country. This was achieved and the pumps are currently in use and have served the country since 2010.

These pumps will not be discarded but will be synchronised and used as alternatives to the installed pumps on the new pipeline.

Claim for Shs 11 Billion by Zakhem

There is no variation for Shs 11 Billion to the contract between KPC and Zakhem.

Line 5 Expected Benefits

This Vision 2030 project will have the following impact once complete:

1.    Due to the country’s economic growth and expansion of the economy, the current annual demand for petroleum stands at 5.7 billion litres in 2016 up from 4 billion litres in 2013. The new line will therefore adequately serve the country’s demand which is projected to be 6.8 billion litres in 2020. 

2.    The line will enhance KPC’s pipeline devolution plan into the counties by increasing product availability in Nairobi that will feed into spur lines into Western Kenya, Central Kenya, Rift Valley and South Nyanza regions. 

3.    The new pipeline will also enhance and improve the reliability of fuel supply to the export market of Uganda, Rwanda and eastern Democratic Republic of Congo which in 2010 stood at 2.4 billion litres but has since risen to 3.5 billion litres in 2016.

4.    The new line is also expected to improve the safety, reliability and efficient delivery of product to KPC’s customers and reduce the constraint on Ullage on current 14” Mombasa to Nairobi pipeline. 

5.    With a one million litres per hour flow rate, the line will remove an average of about 700 trucks from the road daily at maximum utilization. This will enhance safety because pipeline transportation of fuel is the safest and most cost effective way of transporting petroleum products the world over. There will therefore be no tanker accidents, fuel fires, siphonings on our roads hence saving lives and conserving our environment. 

6.    Reduced pump price – the current price build up compensates truck transporters at the rate of one shilling per litre. Elimination of road transport will save the economy approximately Kshs 4.2 billion per year.  

OTHER LEGACY CONCERNS:

1)    Aero Dispenser Company Limited

Some recent media reports have raised concerns about the current state of Hydrant Pit Valves (HPVs) which were supplied by Aero Dispenser Company. HPVs are instruments that enable the refuelling of aircraft at Jomo Kenyatta International Airport (JKIA), and which are owned and maintained by Kenya Pipeline Company Limited (KPC). Specifically, it has been reported that of the 130 valves installed, 60 have malfunctioned, thereby leading to speculation that JKIA may have to close due to a lack of refuelling capabilities.

Currently, JKIA’s apron has a total of 128 HPVs. Out of these, 122 are operational, while 6 are currently not in service, and need replacement. 

A related and relevant fact is that 43 of the 128 HPVs are earlier generation models. In 2014, KPC decided to replace these with current versions in order to comply with the requirements of the Joint Inspection Group, the global organisation that certifies jet fuel quality. KPC set out to procure 60 HPVs for JKIA, to replace the 43 non-compliant valves with the balance 17 being spares. The HPVs were duly delivered but could not be released for use because the procurement process for the valves became a subject of investigation by the Ethics and Anti-corruption Commission (EACC). These investigations are yet to be concluded. We await EACC’s and the Public Procurement Regulatory Authority’s advice on the way forward.

2)    Sinendet-Kisumu Pipeline (Line 6)

This was a Kshs 5.7 billion 122km 10-inch diameter pipeline parallel to an existing 6-inch diameter pipeline from Sinendet to Kisumu (Line 3) designed to enhance petroleum product availability in the Western Kenya and the export market of Uganda, Eastern DRC, Rwanda, Burundi, and Northern Tanzania.

During the procurement process, Petroject failed to comply with the tender requirements on provision of a Performance Bond resulting in cancellation of the tender.

The subsequent contractor (China Petroleum Pipeline Bureau) was selected following a new open tender, and he delivered the project on time and within budget. The project was commissioned in May 2016 and currently serves the Western Kenya regional market, which previously suffered frequent product shortages.

3)    Eldoret Truck Bottom Loading

The upgrade of Eldoret Depot (PS27) loading facilities was necessitated by the increased West Kenya Pipeline Extension (WKPE) capacity from 220 cubic meters per hour to the current combined capacity of 578 cubic meters per hour. The number of trucks that queue to pick products from west Kenya depots has risen over time and this has led to congestion within the depots. KPC has lost business as a result of dealers preferring the Southern corridor (Tanzania) that does not experience the level of delays that are common in KPC West Kenya depots.

The main objective of the project is therefore to enhance the existing facilities to meet the anticipated increase in product uplifts by up to 2000 cubic meters per day. 

The initial EMPRO contract lapsed in 2015, and a new tender for the remaining works was issued in accordance with the provisions of the Public Procurement and Asset Disposal Act 2015.

Currently, the project is 92% complete is expected to be completed in April 2017.

Conclusion

KPC assures the nation that the Company remains committed to deliver on its mandate.  The company is open and willing to avail all necessary information required.

KPC would like to inform its stakeholders and Kenyans at large that it remains focused on delivery of its mandate by ensuring safe, efficient delivery of petroleum products from source to customer not only in Kenya but within the region.

JOE SANG

MANAGING DIRECTOR

FACTS- THE SUBLIME AGENTS FOR LIES. CHEER FOR KPC

The online community has gotten a feaces smithen stories done by few rent-seeking bloggers that were hired by the cartels fighting transformation and automation of services by the management of the Kenya Pipeline company (KPC). Responsibility of cross-checking has been lost in all instances and stories brought by these bloggers. The moral question of who supervises blogging activity needs a serious re-checking. Regretably our constitution gives this right to write opinions and stories to every Kenyan, we failed to introduce how far is far on misinformations and distortions thus created by this right. Responsible online users feel bothered and need protection. It is a matter of time when this may happen. The optimism is it shall happen.

KPC has been upgrading and going towards complete automation on all its services and system to improve on pumping capacity and product evacuation facilities so as to match the rising petroleum demand locally and in the East African region. The cartels and many brokers that the manual working environment has created for the many years now feel redundant and hopeless by the managements act of blocked the leakages and ransominous situations investors were subjected to. Obviously a win for the investors and a loss for cartels. Demonizations of the board to earn public sympathy by misinformation is now the tact that the desperate cartels feel as a resort and stage number one to pressure the government into submission and place their own rouged men to continue with the looting spree. How far should Kenyans take this economical subbotage? How much will the cartels milk the investors? How deepful fear can the cartels make to a new investor? Simply how much more shall we lose as Kenyans?

                                                KPC's extensive piping in Kenya 

Kenya and Kenyans is/are generally a hopeful Nation, this was evident from the discovery that was made by Tullow Oil company in Turkana. Our media covered this story from all angles in length. Responsible social media activist/bloggers were to pick the topic and dissect it in the best way possible to further the discussion and educate the masses on what potential and possibilities this means to our nation. Unfortunately the cartels praying for the collapse of our country at the expense of filling their oversee’s account now by paying a handful of bloggers who introduce poisonous sentiments to the discussions that were set by the media coverage. It is both a let down and sickening to kill the base of hope in the pyramid of reaping benefits as nation. New discoveries come with huge expectations and myrid of challenges but the steps the government has taken so far through the board of KPC is encouraging and as a country we are handling this big mine in a good way.

The government after realizing the big skill gap that may happen as a result of these new mines, the universities now train students on specific skills that are needed for the prosperity and maximum benefit from the same. The University of Nairobi and Kenyatta University now have fully accredited courses that will fill these future gaps. This was a suggestion that was raised after KPC board successfully did a research and feasibility studies in Turkana. Such pro-activeness is only possible when professionalism is set high and shreads of tenderness is full in the hearts of the individuals that manage public institutions. That is what KPC has and that is what we must ask for from all the other boards managing our parastatals and public institutions. This pro-activeness will enable us to prudently utilize the oil and gas resources in our midst whilst planning for our future generation.

After completion of the research and feasibility studies KPC management committed to address the challenges that were identified. The biggest of all was setting up the Morendat Centre of Excellence for Oil & Gas Pipelines with the aim of developing human resource capacity for partner states in oil and gas pipelines management, operations and maintenance to reduce dependence on expatriate workers.

Below is a daily nation link that covered the opening of the Naivasha school.

http://www.nation.co.ke/business/Kenya-Pipeline-sets-up-training-school-to-cut-labour-fees/996-3233790-fo9aylz/index.html

The courses offered in this regional institution at Naivasha which is the creation of the KPC board include;

1. Pipeline Mechanical Technician
2. Pipeline Operations Technician
3. Pipeline Instrumentation and Control (I&C) Technician
4. Pipeline Laboratory Technologist
5. Pipeline Legal Officer
6. Pipeline Fire Officer

                                  Moredant school at Naivasha. This was the creation by KPC

KPC is the only white pipeline operator in the region with over 1,300 kilometres of pipeline network but as the region embarks on large scale oil and gas exploitation, experts estimate that over 2,700 kilometres of pipelines will be developed to coincide with this significant growth. This will require over 2,500 technicians up from the 700 that the region has all of whom are working in KPC. These demand dynamics and strategic institutional linkages in the sector is what the Centre of Excellence will address and as the school opens  doors next month, a new dawn in oil and gas sector will be coming to town.

                                                The extensive piping that is done by KPC

As economic growth in Sub-Saharan Africa is slowing, the Global Innovation Index (GII) 2016 shows that Sub-Saharan Africa must preserve its current innovation momentum. This can only be encouraged by cheering and encouraging the management at KPC not jeering and employing unhealthy bloggers for narrower achievement to the many cartels.

Kenya Pipeline will in March 2017 begin compensating residents of Thange valley in Kibwezi East Constituency who were affected by an oil leak two years ago, making it the first government institution that has done so. Kenya pipeline company has already spent over Ksh 22million in CSR support in terms of clean water, food aid, and bursaries for needy students from Thange area as an entry point into the community to foster more understanding and closeness.

This blog can confirm that KPC has already received 278 claim forms and the verification process is planned to be complete by end of February. Each of the claimants will receive payment through its insurer, CIC Insurance Company. The insurance firm is also engaging with Panafcon - the company that carried out the impact assessment study in the area - with the aim of studying their report to establish if there are matters that need further clarification. 

Below is a standard story that covered the compensation promise from KPC

https://www.standardmedia.co.ke/article/2001227936/kenya-pipeline-to-compensate-278-kibwezi-residents-affected-by-oil-spill

                      What KPC achieved in TWO Month of 2017

KPC's logo 

i)               KPC is one of the largest companies in Kenya, public or private. Its asset base is about Shs 74 billion; 2015 revenue stood at Shs 21.4 billion; 2015 profit before tax was Shs 11.7 billion.  

ii)              KPC is a strategic parastatal in the absolutely vital and growing oil & gas sector because it transports in an efficient and environmentally safe manner the majority of fuel within Kenya. The parastata is also a major regional player. Without its presence, doing Oil and gas business in Kenya and in East Africa would be far more costly, and highly inefficient.

iii)             KPC operates the most extensive pipeline-based petroleum distribution and storage network in Sub-Sahara Africa. The network covered by KPC is 1,342 km whereas the storage potential now stands at more than 612 million litres distributed across the depots in Mombasa, Konza, Nairobi, Nakuru, Eldoret and Kisumu. In 2015 alone, 5.8 billion litres of fuel went through KPC’s system.  

iv)             KPC as a parastatal is not only one of the most profitable public institutions in Kenya, but an institution that was consistently profitable over the years. Worth mentioning is it is the only public institution that do not rely on the Exchequer for funding. On the contrary, KPC is a positive contributor to the Exchequer through tax and dividend payments. Over the last 5 years, KPC paid over Kshs 22 billion in taxes and dividends.

v)              KPC is running Disability Inuka Scholarships scheme that will and has benefited scores of bright but needy disabled children from all 47 counties in Kenya, best boy and best girl from each county. The scholarship covers tuition fees, learning materials and personal effects to help the children realise their dreams.

KPC also runs the Inuka Economic Empowerment Program that trains hundreds of Persons With Disability (PWDs) across Kenya on how to access public procurement opportunities. The aim of this intervention is to increase the participation of PWDs in public procurement and help alleviate poverty and curb unemployment.

vi)             Unique HR skills – Being the only white oil pipeline operator in Kenya, KPC’s 1700-strong workforce has unique technical and professional skills in oil & gas pipelines management, operations and maintenance.  As the region embarks on large scale oil and gas exploitation, experts estimate that over 2,700 kilometres of pipelines will be developed to coincide with this significant growth. This will require over 2,500 technicians up from the 700 that the region has all of whom are working in KPC. In fact, Kenya has only three welders who can weld a live pipeline (with fuel flowing) and all of them are in KPC!

vii)      KPC has developed a ten (10) year transformational Corporate Strategic Plan dubbed KPC Vision 2025 aimed at ensuring the company begins to play a more significant and strategic role in the oil & gas sector in the region. Through the plan, KPC targets to widen its business focus by entering into upstream, midstream and downstream activities of the oil & gas industry in East and Central Africa. The plan outlines the strategies, action plans and key performance indicators that will enable the Company achieve its vision.

Major Projects KPC is undertaking;

KPC has invested Ksh60 billion in massive infrastructural projects designed to consolidate its position as a market leader in oil & gas commerce in the region. The Company is undertaking the following key capital projects:

Sinendet-Kisumu Pipeline (Line 6):

The now complete new Sinendet-Kisumu pipeline (Line 6) is a 122km 10-inch diameter pipeline parallel to an existing 6-inch diameter pipeline from Sinendet to Kisumu (Line 3) expected to enhance petroleum product availability in the Western Kenya and the export market of Uganda, Eastern DRC, Rwanda, Burundi and Northern Tanzania.  The line has increased product flow to Kisumu depot by 350,000 litres per hour from the previous 110,000 litres per hour thus increasing the country’s competitive edge in the region as a leading petroleum products exporter. The additional product has enhanced optimization of tank utilization in Kisumu which stood at 30% for many years. The full tank capacity for the port town is now 39 million litres. The annual demand for petroleum products in Western Kenya is 1.1 billion litres whereas the regional demand stands at 3.3 billion litres. The new line will therefore enable KPC serve not just Western Kenya region, but also the neighbouring countries. It has also opened up development of other projects such as the Kisumu Oil Jetty (KOJ) and the planned Kisumu – Busia Pipeline. The oil jetty will facilitate transportation of petroleum product via Lake Victoria to the neighbouring countries. The project cost 5.7 billion and its return in just a year is estimated to be 3.7 billion. This means by the end of two years the project would have raised enough to make profits for the country.

Replacement of the Mombasa – Nairobi Pipeline:

The Company is in the process of replacing the existing Mombasa-Nairobi pipeline that has been in operation for 38 years. A Vision 2030 flagship project, the construction of the 20 inch diameter 450km pipeline commenced in the year 2014 and is expected to be completed in 2017. Once complete the pipeline will ensure sustained, reliable and efficient transportation of petroleum products in the region and meet demand in the next 30 years with an installed flow rate for phase one of 1 million litres per hour by 2017, 1.9 million litres per hour for phase two by 2023 and 2.6 million litres per hour for phase three by 2044. The pipeline will also enhance safety and protect the environment since transportation of oil via a pipeline is the safest, fastest and most environmentally friendly means which will not only remove hundreds of trucks from our roads at maximum utilization, but also lower our pipeline maintenance costs. The estimated cost for this project is 48.4 billion.

Construction of Additional Tanks at Nairobi:

Construction of four additional storage tanks at Nairobi Terminal each with a gross capacity of 33,366,000 litres is ongoing. The additional tanks will more than double the storage capacity of diesel and super petrol from the current 100 million litres to 233 million litres effectively providing sufficient capacity for receipt of higher volumes of product expected once the Mombasa–Nairobi pipeline is replaced. This will maintain adequate stocks for petroleum products in Nairobi to cushion the economy from product outages. Besides guaranteeing security of supply of petroleum products, the new tanks will also enhance operational flexibility and increase tank turnaround at KPC’s Kipevu Oil Storage Facility (KOSF) in Mombasa resulting in more ullage creation at KOSF and reduction of demurrage charges. This ongoing project is estimated to cost 5.3 billion.

Construction of Additional Loading Arms in Eldoret:

Installation of additional loading facilities is required to cope with the rising demand for petroleum products uplifts at Eldoret depot which serves Western Kenya region and the neighbouring countries namely Uganda, Eastern DRC, Rwanda, Burundi, Northern Tanzania and South Sudan. The project will enhance the existing facilities to meet the anticipated increase in product uplifts by up to 2 million litres per day achieving the full benefits of Line 4 (Nairobi – Eldoret parallel line). The works entail installation of two bottom loading facilities with three loading arms each to load diesel, super petrol, and kerosene to increase the service delivery efficiency. Once complete, the loading arms will enhance operational flexibility creating more ullage in Eldoret to feed western Kenya and the neighbouring countries. This ongoing project will cost the company Ksh 335 million.