So Kenya bought a 2.5% stake in Uganda’s Oil refinery but why really?

Oil RefineryKenya bought 2.5% stake in Uganda’s Oil Refinery and that is supposed to be good news.

Indeed it is good news. Actually, Kenya’s decision to get a stake in Uganda’s Oil Refinery, a couple of weeks after RT Global Resources was selected to construct the refinery goes against the notion that Kenya would oppose Uganda’s bid to get its refinery because it possess that 50-year-old refinery in Mombasa.

Interestingly and contrary to the said notion held by many of the speculators before, Kenya has become the first East African Country to buy a stake in the refinery.

“We invited all EAC partner states Tanzania, Rwanda, Burundi and Kenya to buy shareholding in the refinery. This is going to be a regional refinery. It’s only Kenya that has confirmed 2.5% shareholding equity in the refinery project. Other EAC partner states are considering their shareholding,” the Minister of State for Foreign Affairs is reported to have said in the East African Business Week

But then that leaves us with the question why did Kenya get a stake as early as now in the refinery that is set to be built in Kabaale Parish, Hoima District?

Fortunately, the answer to that question is not hard to find.

First Kenya’s decision is partly driven by the need to keep close ties with Uganda. You have to stay well and you neighbor also you know. But even then the regional politics of the day dictate that East African countries support one another. It is the reason why Uganda invited the East African states to buy a shareholding in the project the first place anyway.

However apart from that, Kenya’s only oil refinery, which was supposed to be the reason for Kenya’s opposition to the construction of Uganda’s own refinery has been literally ailing. In fact at the end of last year speculation was rife that the refinery could suffer a natural death and get shut down. Things have since changed with the Kenyan government considering reviving the oil refinery in the wake of the oil discoveries and the prospected oil and gas boom not only in Kenya but generally in East Africa.

Yet even in a bid to save the Kenyan Refinery, one of the considerations is to turn the facility into a storage entity for oil products as opposed to keeping it as a refinery. Actually maintaining it or revamping it into a functional oil refinery may not be economically viable.

Therefore when Uganda decides to construct its own refinery it makes perfect sense for Kenya to get a stake after all Uganda also has the larger amounts of oil and it may be cheaper for Kenya in the long term to depend on Uganda for its refining needs other than continue to stake its petro-dollars on that old, aching refinery in Mombasa.

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