Kenya is set to shift the mass importation of petroleum products from commercial oil companies to a state-owned refinery following the signing of a 250-million-U.S. dollar loan package with an international bank.

Standard Chartered Plc is providing 250 million U.S. dollars out of the total of 400 million dollars required to purchase crude oil internationally to keep the project running. The loan will enable the state-owned Kenya Petroleum Refineries Limited (KPRL) to purchase crude oil internationally and refine for sale in Kenya and the rest of the east African region.

"KPRL will be switching to a merchant refinery. This loan is a stepping stone to our switch from a toll refinery to a merchant refinery," the company's managing director Brij Mohan Bansal told a news conference on Wednesday.

The firm would effectively manage crude oil inventories, reducing on the losses that have been inherent in the past, Bansal said. KPRL is a joint venture between the Kenyan government, which controls 50 percent, and Essar Energy Overseas, an Indian state- owned firm.

Kenyan oil marketing companies often buy crude through what is known as the Open Tendering System (OTS), where all oil firms pool their resources together to buy crude oil in bulk.

"This facility will be utilized for our working capital requirements. We will now be able to procure oil, process it and sell the petroleum products to marketing companies," Bansal said.

Robin Bairstow, the Regional Head of Origination and Client Coverage in East Africa at StanChart, said the transaction would enable the joint venture to change its current status of charging for the cost of refining to marketing its oil produce.

"We are delighted with this landmark transaction. StanChart has been a trusted advisor to the company (KPRL). It will enable the company to change a number of things," Bairstow said.

Energy ministry's Permanent Secretary Patrick Nyoike said signing of the agreement would not mark the end of the joint oil purchase agreements, but would allow the refinery to purchase crude oil affordably from the best suppliers internationally.

Following the agreement, the oil refinery would source for cheaper crude oils or crude oil blends from areas not previously accessible to the refining firm, said John Mruttu, the KPRL General Manager.

The refinery, which processes 1.6 million tonnes of crude per annum currently, has been gearing for the upgrading of its equipment to enable it to refine higher quality products. With the upgrade, it will not only process the Murban crude from Abu Dhabi in the United Arab Emirates (UAE), but will be capable of handling crude oil from cheaper sources.

"This will be the beginning of another chapter in KPRL. We will be able to make better management of resources under our care," Bansal said.

Copyright 2012 Xinhua News Agency

(Originally published June 20, 2012, by Xinhua General News Service.)