Kenol angles for Uganda oil with Phoenix buyout

A Kobil petrol station. Photo/FILE 

By VICTOR JUMA  (email the author)
Posted Wednesday, January 26 2011 at 00:00

Oil marketer KenolKobil is set to acquire a Ugandan oil dealer as it eyes that country’s oil find, which threatens to hurt Kenyan oil firms’ export earnings.

The firm has signed a deal to acquire Phoenix Uganda Petroleum Limited, a depot with a capacity for 1,800 cubic metres of fuel and three service stations, raising its total depots and service stations in the Ugandan market to two and 66 respectively.

Uganda will from next year start building an oil refinery to meet local demand and later scale up capacity for exports, a move that is set to cut off petroleum imports from Kenya, hurting oil marketers.

More than 700,000 tonnes of petroleum products — including liquefied petroleum gas —consumed in Uganda annually is supplied by Kenyan oil firms.

Kenol says the expanded footprint will put it in a position to make up for an expected reduction in the oil export business.

“The oil transit business from Kenya will be diminished and the extent of business loss will depend on the range of products Uganda will be refining,” said Patrick Kondo, the head of mergers and acquisitions at Kenol.

He said the company sees an opportunity in exporting finished oil products from Uganda to other regional markets, including Kenya that are expected to start importing oil products from Uganda that are set to be cheaper, saving on freight and insurance charges.

Uganda will refine 25,000 barrels per day (bpd) to meet its local consumption and later refine up to 200,000 bpd targeting the export markets of Kenya, Rwanda, Burundi and DRC, which are served from the Kenyan market.

Landlocked Uganda relies heavily on Kenya to import over 700,000 tonnes of refined oil products annually but its discovery of 2.5 billion barrels of crude oil deposits is set to change this.

Building of the refinery begins next year and it is expected that by 2016, Kenya’s export of refined oil products to Uganda will cease as the oil-rich country consumes its home-made products, hurting the fortunes of Kenyan oil marketers.

This has seen firms like Kenol scout for new opportunities as they seek to diversify away from the Kenyan market that rakes in most of their revenues.

Mr Konda said Kenol is looking at other acquisition opportunities in Uganda and Burundi.

The latest acquisition is the second for Kenol in the Ugandan market after the firm took over Galana Oil Uganda Limited in 2000.

Kenol sells liquefied petroleum gas (LPG), bitumen, petrol, and diesel in Uganda.

Aside from the expansion of its service station and depot network, Kenol is also planning to build a modern LPG filling plant that will have capacity to meet its needs and those of its rivals.