Kenya strikes range of lucrative deals with Libya

Jun 26, 2007 02:00 AM

New details have emerged of the deals that were struck during President Mwai Kibaki's three-day visit to Libya in May.
Apparently, Kenya has quietly signed an exclusive trade pact with Libya granting Tripoli "most favoured nation" status -- making it possible for Libyan companies to start at an advantage over investors when competing for lucrative contracts. Titled "Agreement on Promotion Guarantee and Protection on Investment," the document is signed by Kenya's Minister for Trade, Dr Mukhisa Kituyi, and Dr Ali Elisaue, secretary general of Libya's General People's Committee for the Economy and Investment.

Clearly, Tripoli is set to become a major investor in Kenya in coming months. During discussions with the Kibaki mission, the Libyans expressed interest in a total of six projects.
Topping the list is the interest expressed in the purchase of the Grand Regency Hotel by the state-owned Libya African Investment Portfolio (LAP). It is understood that during the discussions, the team from Kenya agreed to consider the request. The Grand Regency is currently being run by receivers appointed by the Central Bank of Kenya.

In the information and communications technology (ICT) sector, the Libyans want to take up a stake in The East African Marine Cable System (Teams). It is understood that the Libyan African Investment Portfolio expressed an interest in taking a 20 % share in Teams.
Under the project, a fibre-optic cable will be constructed between Mombasa and Fujaira in the United Arab Emirates at an estimated cost of $ 100 mm. The current partners are the Kenya government and Etisalat of the UAE.

The Libyans also expressed an interest in a new pipeline from Mombasa to Nairobi. Apparently, the government has already commissioned a demand study to determine oil requirements by Kenya and other landlocked countries for the next 30 years. The whole undertaking is based on the assumption that the current upgrade on the Mombasa-Nairobi pipeline will only meet demand for the next seven years.
It is understood that during the discussions in Tripoli, the state-owned company Tamoil expressed an interest in participating as a major equity partner in this project jointly with the Kenya Pipeline Company on terms similar to those of the joint venture project for the Eldoret-Kampala Pipeline, in which its equity is at least 51 %. It was agreed that Tamoil's request be considered once the study is completed and its findings accepted.

With regard to oil, the two parties agreed that two experts from Tamoil would travel to Nairobi in July to hold meetings with the National Oil Corporation of Kenya (NOCK) and the Ministry of Energy to work out modalities for supplying oil to Kenya at agreed prices. It was agreed that the visitors from Tripoli start negotiations with the ministry and NOCK on the quantities of refined petroleum fuels and crude oil to be supplied by Tamoil and the applicable terms.
The anticipated volume of oil to be supplied to Kenya by the Libyans is estimated at between 30 % and 40 % of the country's total demand. The current demand for petroleum fuels, which is met through imports of both crude and refined oil, is close to 2.8 mm tons.

The government's argument is that the entry of the Libyans into the fray will broaden the supply of sources of oil and therefore bring competitive pressure to bear on the whole system. Tamoil, which is currently holding discussions with the Kenya Petroleum Refineries on its participation in the proposed LPG handling and storage facility in Mombasa, also expressed a desire to hold 51 % of equity in the proposed joint venture. It was agreed that the level of Tamoil's equity participation in the project be reviewed.
Consumption of LPG in Kenya, which stood at more than 64,000 tons in 2006, is constrained by lack of adequate handling facilities in Mombasa. Already, an existing plan to construct a 6,000-ton modular LPG facility through a public private partnership is in place and progressing well.

The proposed joint venture company is spearheaded bythe Kenya Petroleum Refineries Ltd (KPRL) and the Kenya Pipeline Company. Also on the list of projects the Libyans are interested in is the upgrade of Kenya Petroleum Refineries.
Tamoil said it was interested in participating in the upgrade but added that it would state its level of commitment later. Tamoil also pointed out that there was a need to provide protection to the venture for a period of up to 10 years to ensure full amortisation of the investment.

The Kenya delegation informed the Libyans that a consultant had been hired to update the cost of the upgrade, which had been estimated at $ 270 mm, and their report was expected by September this year.
The Kenya delegation said the current shareholders of KPRL had given a commitment to sell their entire equity to new shareholders.

Source: East African/All Africa Global Media
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