NOT AN OFFICIAL UNCTAD RECORD

1. NOT AN OFFICIAL UNCTAD RECORD Are small refineries viable?The Kenyan PerspectivePresenter: Chris House, General Manager, Kenya Petroleum Refineries Limited, Mombasa.

2. KPRL Mombasa Refinery • Shareholders: • 50% Government of Kenya • 50% Shell / BP / ChevronTexaco Global Energy Inc. • Hydroskimming refinery • 2 trains • Capacity 70 kbbl / d (3.3 million tpa) • Product Delivery • pipeline to local terminals • KPC pipeline to Nairobi / Kisumu / Eldoret • 20 users with processing agreements

3. KPRL Performance Continuous Improvement since 1997 • HSE • Among the best in international benchmarks • Sustainable through comprehensive systems that are in place • Reliability • Considerable reduction in unplanned shutdown days • Advanced reliability management techniques in place (Risk Based Inspection and Reliability Centred Maintenance) • Efficiency • Fuel and Loss reduced by 1% woc • LPG recovery increased by 20% • Cost • Operating Cost almost constant in MOD terms • Highest manpower efficiency in WB sponsored African refinery study

4. KPRL – Advantages & Added Value for the Country • An alternative supply source for petroleum products • A reliable, safe and economical supply of LPG and fuel oil • Centre of excellence for technical and management training • Provides direct and indirect employment (600 own and contractor staff) • Major source of revenue (approx 5million USD p.a. taxes and dividends) for the Kenya Government

5. Issues for KPRL • Product Quality • Unleaded gasoline • Low sulphur diesel • Unsatisfactory Competitive Position • Hydroskimming refinery requires Government protection • Base load rule • Import duties • Crude processing level constrained by fuel oil • Limited flexibility to process range of crudes • Unsatisfactory Power Supply • Frequent total power failures • Frequent major power dips

6. Premises Product Quality: • Gasoline: • a single 93 octane unleaded grade. • Diesel: • Low sulphur, 0.05% wt Prices: • Average actual for 1999 - 2003 Product demand: • High growth 6% pa Low growth 2.5% pa

7. New Facility Requirements • For unleaded gasoline • A tops isomerisation unit to increase octane from 65 to 88. • Revamp of existing catalytic reformers to increase capacity (completed December 2004) • For low sulphur diesel • A Gasoil HydroDe-Sulphurisation (HDS) unit • An amine treating, sour water stripper and sulphur recovery unit for sour gases

8. New Facility Requirements - 2 • For improvement of competitive position • A Thermal Gasoil Unit, TGU (thermal cracker) • For power supply stability • A Gas Turbine using excess refinery fuel gas to enable power self-sufficiency • For offsite facilities • Additional storage to handle increased LPG production • Water treatment facilities to handle entire refinery waste water effluents

9. Benefits of TGU Residue conversion (TGU) increases refinery margin by: • Producing more high value products and less fuel oil per tonne of crude Thereby, • Enabling higher crude intake for a given fuel oil demand Additionally, • Processing flexibility is increased allowing cheaper crude oil selection Refinery margin increased by approximately 40 million USD p.a.

10. Benefits of TGU What would today be like if the TGU was already in place ?

11. New Facility Requirements - 2 • For improvement of competitive position • A Thermal Gasoil Unit (thermal cracker) • For power supply stability • A Gas Turbine using excess refinery fuel gas to enable power self-sufficiency • For offsite facilities • Additional storage to handle increased LPG production • Water treatment facilities to handle entire refinery waste water effluents

12. Conclusions Based on the average prices for 5 years, and with USD 160 million investment: • Refinery can produce Unleaded Gasoline and Low Sulphur Diesel • TGU improves competitive position dramatically (additional USD 40 million per annum) • LPG production will exceed 100 kt/a • Refinery will be self sufficient for power • Option exists for significant power export • Protection is no longer required