By WASHINGTON AKUMU 

The government requires some Sh7.8 billion to upgrade the Mombasa refinery.

Energy Minister Raila Odinga said that this was the figure arrived at by a special study commissioned by the government.

Mr Odinga, however, clarified that the government was yet to decide whether to proceed with the project or to build a new refinery altogether.

"We are looking at the cost viability of each of the options. We have learnt that a new factory would cost us $600 million (Sh46.8 billion). We are consulting to reach the optimal solution, especially with our brothers in Sudan who are building a similar facility," he said.

The government has been under increasing pressure to upgrade the refinery to improve its efficiency and enable it produce the increasingly popular unleaded fuel.

Petroleum firms would still be required to refine 70 per cent of their oil at the refinery to keep it running and to ensure constant supply of by-products such as Liquified Petroleum Gas (LPG), he said. 

The recent direct importation of refined unleaded petrol by some firms has put in doubt the future viability of the facility. 

Mr Odinga spoke at his Nyayo House office, Nairobi, when Chinese Ambassador Du Qiwen paid him a courtesy call yesterday.

The minister denied that he was on a crusade to have Kenyan firms import duty-free oil from the Sudan, and had only gone to that country to explore areas of mutual cooperation, especially in the petroleum industry.

"The petroleum industry is completely liberalised. Companies are free to negotiate import deals with their Sudanese counterparts. We can only provide information as a ministry," he said.

He requested the Chinese Government to provide Kenya with technical expertise in oil exploration, saying the country held great promise, but was constrained by high costs.

"Kenya shares the same geological basin with Sudan's oil belt. In fact, the wells are no more than 400 kilometres from our border."

Chief Geologist Don Riaro explained that more exploration needed to be done before a conclusive position can be given on Kenya's oil prospects.

"Of the 24 blocs in Kenya, only four are contracted with some 30 wells having been sunk. This translates to an aggregate of one well per 10,000 square kilometres, against a global average of one per 5,000 square kilometres," he said.

Chinese firms are big players in the Sudanese oil industry where they have been active since American Big Oil left following the slapping of trade sanctions against Khartoum.