Nairobi, Kenya-based KenolKobil announced on May 19 it will build a lubricant blending plant in Mombasa at a cost of between $10 million (Sh958 million) and $15 million (Sh1.4 billion) for production of Castrol-branded lubricants. Financing of the plant would be through a joint venture with oil major BP Southern Africa, owner of Castrol lubes. The planned unit will have a annual capacity of 12,000 tonnes of lubes.

The two firms on that same day signed a deal giving KenolKobil exclusive distribution rights for Castrol lubricants, following a long legal tussle between the two companies over an agency contract that had seen BP attempt to repossess the brand from Kenol and award it to its former partner Shell. Kenol previously had a deal to supply the Castrol lubricants with initial owner of the brand, Burmah-Castrol of Scotland, but the supply contract was complicated after BP bought out the Scottish firm in 2000. BP exited the Kenyan market in 2007.

“We will set up a new blending plant in Mombasa in the next one or two years at a cost of between $10 million (Sh958 million) and $15 million (Sh1.4 billion),” said KenolKobil managing director David Ohana at the signing of the agreement in Nairobi.

KenolKobil has another smaller lubes plant in Ndola, Kenya with a annual production capacity of 7,000 tonnes for its own lubes. The Mombasa Plant serves the East Africa Communities (EAC) member countries as well as Eastern Congo DR, South Sudan and Somalia. The Zambia Blending Plant in Ndola serves Central Africa countries of Zambia itself, Lubumbashi in the Katanga Region of Southern Congo DR.

KenolKobil currently imports the Castrol lubricants from South Africa, which attracts an import duty of 25 per cent. The oil marketer is seeking to import only inputs that attract 10 per cent duty for local blending, critical in cutting costs.

KenolKobil, which is Kenya’s third-largest oil dealer by market share after Total and Shell, will sell the Castrol brand in Kenya only despite having a footprint in Tanzania, Uganda, Zambia, Rwanda, Burundi and Ethiopia.

The firm said it would re-launch Castrol brands in the next two months, in a rejuvenated marketing campaign.

The deal with BP will potentially strengthen Kenol’s financial health with the firm having been on a rebound from a record Sh6.3 billion loss reported in 2012.

Kenol returned to profitability in the year ended December 2013, with a positive bottom line of Sh558.4 million. In the period to December 2014, the marketer reported a net profit of Sh1 billion.