Piracy blot will hurt oil costs

December 9, 2008

, NAIROBI, Kenya, Dec 9 – Heightened pirate activity off the coast of Somalia is likely to result in increased fuel prices in Kenya, a local petroleum company said on Tuesday.

Kenol/Kobil Public Relations Manager Charles Njogu said that the hijackings had pushed up shipping and insurance costs. He expressed fears that the activities were forcing vessels to divert, causing delays in delivery and rising costs.

“We are witnessing vessels arriving much later than their scheduled arrival dates due to the long route they are forced to take in keeping a safe distance from the Somalia coastline,” Mr Njogu said in a statement, adding that the vessels were now experiencing delays of between three and five days.

The manager added that some vessel owners had shown reluctance to deliver the precious commodity, signalling an impending shortage.

“Those willing to deliver are charging higher premiums to cover their risks,” he said, in a statement that comes barely a week after oil companies in the country lowered pump prices by Sh15, to reflect the decline in global crude oil costs.

However there is increased public pressure for further reductions at local fuel stations, as crude oil prices remain at their lowest since the start of the year. A barrel of crude oil sold at $43 in November, down from $147 in July.

Mr Njogu stated that a crude oil vessel named MT CE Pacific, chartered by Kenol/Kobil, is one of the tankers that have been delayed by about three days from her scheduled arrival date range.

“Given the unpredictability of the situation, delays will affect supply arrangements, particularly of petroleum products, in the future as the country and the region witness an increasing demand arising from the projected growth in economies,” he said.

The PR Manager explained that the trend could also affect other industries involved in imports and exports as well.

Kenya is set to host an international conference on the vice on Thursday as the region seeks a solution to the constant attacks. The pirates hijacked a Saudi tanker, Sirius Star, last month with two million barrels of crude oil worth $100 million (Sh7.8 billion) on board.

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