Kenya imports on average 150,000 tonnes of coal and coke annually at a cost of Kshs3 billion ($35.3 million). Coal is used in steel and cement factories. KenGen also plans to put up a 600 MW coal-fired power plant in Kilifi that will rely on imported coal. This may change, however, with the exploitation of coal reserves in Ukambani region. The Ministry of Energy has been conducting exploration for coal in the Mui Basin since 1999, covering an area of 500 square kilometres and already two promising blocks have been concessioned to a Chinese company.
To ease exploration logistics, the ministry subdivided the Mui Basin into four coal blocks, A, B, C and D, measuring 121.5 , 117.5, 131.5 and 120 kilometre squared, respectively. Seventy one exploration and appraisal wells have been drilled in the Mui Basin, mainly concentrated in Block C where 56 wells were drilled to depths ranging from 75 to 445 metres. Some 32 wells have intersected coal. To fast track exploration, development and production, the Government has decided to concession all four blocks to private companies through a competitive international bidding process.
The Government received interest from 16 firms in 2010 when it started the search for a company to mine the coal, whittling this down to 11 firms, seven of which eventually submitted their bids. China’s Fenxi Mining Group won the rights to develop coal mines for block C and block D. Block C is estimated to contain at least 400 million tonnes of coal and is projected to be running within two and a half years.
The Government has said it expects the coal to be for local use. Fenxi will pay the government $3 million for block C and $500,000 for block D, in return for a renewable concession of 21 years, subject to approval by Parliament. It will also allow the Government to have an 11 per cent participation in the project, sharing gross revenues at a rate of 23.6 per cent for block C and 21.1 per cent for block D.