Essar seals Kenya refinery deal, to retail fuel
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Essar seals Kenya refinery deal, to retail fuel UPDATED 31 Jul 2009 | 12:26  
Essar seals Kenya refinery deal, to retail fuel

By Duncan Miriri

NAIROBI (Reuters) - India's Essar Group will set up fuel stations in Kenya after upgrading the refinery in Mombasa, its chief executive said on Friday.

Prashant Ruia spoke after the Mumbai-based firm formally took up a 50 percent stake in Kenya Petroleum Refinery Limited (KPRL) after buying out three oil majors that owned it jointly with the Kenyan government.

"It is early days but we have a plan. Our model in India is to be a refinery with retail and market distribution. We have 1,500 gas stations in India which we operate on a franchise basis," he told Reuters after the ceremony.

"We will see how we can bring that model to Kenya."

He said the acquisition of the ageing refinery in Mombasa will allow the firm to raise its involvement in the oil and gas business in a region that is gaining visibility in the business due to recent discoveries of oil in Uganda.

"These are initial steps and we do believe that we will become players in this part of the world," Ruia said.

Essar, which has interests in diverse sectors like telecommunications, steel and transport is already present in east Africa through, YU, Kenya's fourth mobile phone firm.

Besides buying the 50 percent stake from Shell, BP and Chevron, Essar paid the Kenyan government $2 million to give up its pre-emptive rights.

It is now expected to pump in another $350-$400 million for the modernisation of the refinery. Ruia said the company had not firmed timeframes on when the upgrades would be completed.

The Mombasa refinery serves Kenya and neighbouring Uganda, Burundi and Rwanda. It processes 1.6 million metric tonnes of crude each year, about 40 percent of the regional consumption, Kenyan officials said.

Oil importers are required by law to process a defined amount of imports at the refinery in order to keep it afloat, but the policy will be changed after modernisation and clearance of principal loans taken by the refinery, officials added.

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