India’s Essar Oil is about to exit the Kenyan market, with the sale of Essar Petroleum East Africa to Gulf Petrochem, one of the world’s leading sellers of bitumen based in the United Arab Emirates.
Essar Petroleum is owned by Essar Energy Overseas Ltd. (99.7%) and Essar Energy Holdings Ltd. (0.3%). Essar Energy Overseas Ltd., based in India, operates as a subsidiary of Essar Oil Ltd. Essar Energy Holdings Ltd., based in Mauritius, operates as a holding company, which through its subsidiaries engages in exploration and production, refining and retailing of petroleum products.
The company has a local market share of about 1.1% and operates two retail outlets in Nairobi under franchise.
In 2013, Essar announced its intention to divest from Kenya Petroleum Refineries Ltd. (KPRL) amid a row with the government, in which the firm was blamed for failing to invest in the modernisation and upgrade of the Mombasa refinery, as per the terms of the shareholder agreement between the two partners. Last September, the Cabinet approved the planned acquisition of the 50% that Essar Energy Overseas Ltd. held in KPRL at a cost of USD5 million.
Gulf Petrochem is interested in East Africa mainly for the opportunity to sell bitumen as construction of asphalt roads is rising. The Kenyan government is planning to build 10,000 kilometres of roads within 10 years. The Mombasa refinery is the only refinery in Eastern Africa. It currently produces liquefied petroleum gas (LPG), gasoline, diesel, kerosene and fuel oil.
Gulf Petrochem will continue to operate the business of selling refined petroleum products in Kenya and later expand the range of products it sells to include fuel oil, bitumen and LPG, under a different brand name, Gulf Petrochem Limited. It currently owns a bitumen depot in Tanzania, but wants to make Kenya its hub for East African operations.