Fresh alert sounded on fuel shortage

January 27, 2009

, NAIROBI, Kenya, Jan 27 – Kenyans should prepare themselves for an imminent fuel shortage in the next two weeks, oil industry players have warned.

An industry source, who wished to remain anonymous, on Tuesday revealed that the anticipated shortage would be more acute than the one experienced last month unless the storage space allocation problem at the Kipevu Oil Storage Facility (KOSF) is urgently addressed.

“There are eight vessels that are still at sea waiting for clearance to offload the millions of litres belonging to different oil companies. This is because 50 percent ullage has been allocated to one company which has resulted in reduced storage space for other shippers,” he claimed.

The Kenya Pipeline Company (KPC) on the other hand confirmed to Capital Business that they were expecting a shortage of premium petrol but added that all parties involved had agreed that the industry players would urgently import the product.

While absolving KPC from any blame, Acting Operations Manager Philip Kimelu said that industry players had delayed the importation of petrol but added that there had been communication among all players that the vessel containing the product would be given priority and offloaded first when it docked.

“KPC is not involved in the shipping schedule of vessels. That is the mandate of the Kenya Ports Authority, shipping agents and the oil firms themselves, so we (KPC) should not be blamed for the anticipated shortage,” Mr Kimelu said.

Other players had blamed the newly upgraded Mombasa-Nairobi oil pipeline for the limited supply of products.

But once again Mr Kimelu came to his company’s defence, saying that all four pumping stations were running at full capacity and they were pumping fuel at an average rate of 550 cubic meters (M³) per hour.

Documents seen by Capital Business however show that the average flow rate between January 2 and 21 was 489 cubic meters per hour. For instance, the document indicates that on January 2 the pumping rate was 413.79M³ while on January 21 it was 446.7M³ per hour.
Petroleum Institute of East Africa Chairman Eng Patrick Obath reckoned that the country should be operating at a capacity 640 cubic meters per hour.

In 2008, KPC carried out a capacity enhancement project, which saw the pipeline’s flow rate doubled to 880 cubic meters.

On accusations that an unnamed company was holding stocks beyond the normal storage period for speculative purposes, the Operations Manager claimed that the storage tanks (at Kipevu) were almost empty.

“The storage space for super petrol is empty while that of diesel is enough to handle more stocks. That is why we are asking the marketers to bring more fuel,” he asserted.

The oil marketers alleged that the ships waiting to berth were leading to a daily loss of approximately Sh20 million in demurrage charges. These costs coupled with other hidden charges incurred from transporting products on rail and road are passed on to the end consumer.

This is the reason why local fuel prices have stagnated at an average of Sh79 for a litre of petrol despite a 72 percent drop in international crude oil prices in the last six months.

The ongoing oil scandals and the subsequent investigations into the oil scam have resulted in a negative credit rating for the local industry, which means that their financiers are reluctant to fund them.

The firms have therefore cautioned that the increased cost of financing might contribute to a Sh1 or Sh2 increase in fuel prices in the coming days.

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