Essar Energy , the London Stock Exchange-listed India-focused energy company, has announced its decision to exit Kenya Petroleum Refineries Ltd (KPRL) . The company believes the project is not economically viable. KPRL, owned 50 per cent by Essar, operates the oil refinery in Mombasa, Kenya.

Essar Energy had acquired a 50 per cent stake in KPRL in July 2009 for $7 million from BP, Chevron and Royal Dutch Shell. Under the terms of the shareholders’ agreement with the Government of Kenya, Essar Energy has the right to exercise a put option under which the Government of Kenya would buy Essar Energy’s 50 per cent share for $5 million.

Therefore, Essar would stand to lose $2 million, nearly 30 per cent of its original investment. Essar Energy, through its subsidiary Essar Energy Overseas Ltd., has exercised a put option under the shareholders’ agreement to sell its stake in KPRL to the Government of Kenya.