Treasury is pushing for a middle ground in resolving a protracted row over the future ownership of the Kenya National Petroleum Refineries, pitting Essar Oil and Gas of India and Libya's Tamoil Africa Holdings.

The dispute between the two revolves around the bid of 50 per cent stake in the refinery owned by oil majors Shell, BP and Chevron, who had last year agreed to sell the stake to Essar subject to the Government waiving its first right of purchase.

The upgrading of the refinery and Kenya Pipeline is also expected to continue playing a major strategic role at a regional level because of the reliance of the neighbouring countries on Kenya's supply routes in meeting their growing energy needs.

The Kenyan government is proposing that Essar is not committed to injecting capital for the facility's upgrade. Now the government appears to have softened its stance with a proposal that Essar Oil and Gas cede 25 per cent of the stake it acquired from Shell (17.3 per cent), BP (17.3 per cent) and Chevron (15.4 per cent) to Tamoil.

It asked Essar to match the offer, but they are unwilling. Business Daily (Nairobi)

The Kenyan refinery is currently processing 1.6 million tonnes of crude, reflecting a 40 per cent utilization factor. Energy ministry officials say the new strategic investor must commit to help finance the upgrade and stay on board for at least six years. Tamoil is banking on diplomatic clout to have its way in the dispute following the signing of a protocol between Kenya and Libya in January 2007.

Under the accord, Kenya committed to give Libyan companies preference in a number of projects, including the refurbishment of the refinery.