Kenya Oil complains of systems

May 22, 2009

, NAIROBI, Kenya, May 22 – An oil industry player has claimed that the inefficiencies in Kenya’s oil supply system are causing the loss of millions of shillings to the country’s economy and threatening its position as the gateway to the East Africa region.

Kenol Kobil’s Merger and Acquisitions Manager Patrick Kondo told reporters on Friday that regional countries that rely on Kenya for their imports were now opting for other alternatives such as Dar es Salaam.

“If you go to Burundi, you will find that unlike in the past, whereby almost 100 percent of their oil came from Mombasa, almost 100 percent of their requirement comes from Dar es Salaam. Rwanda has 60 percent coming from Tanzania and 40 percent from Kenya. The same case with Uganda,” he alleged.

To support his argument, Mr Kondo said these countries want to avoid the scenario experienced during the post election violence where none of their imports were reaching them due to the constraint.

“When Kenya was running dry of products, there were many vessels at the Port of Mombasa waiting to offload. Remember, when the country is running dry so were Rwanda, Burundi, Uganda and the DRC (Democratic Republic of Congo),” he said.

Mr Kondo said the government needed to urgently address the storage and supply constraints at the Kenya Pipeline Company and the Kipevu Oil Storage Facility (KOSF) so as to reduce these losses.

The Mombasa-Nairobi oil pipeline which has the capacity to pump 880,000 litres per hour is only doing an average of 457,000 litres.

“We need to sort out this issue immediately so that we can even avoid exporting jobs to the neighbouring competing ports. When drivers are loading (goods) here in Mombasa, Nairobi or Western Kenya, there’s a positive effect on the economy. But if the opposite happens, it’s only the Kenyan economy that will suffer,” he cautioned.

He said the country could ill afford such losses particularly at a time when it is grappling with so many challenges.

Speaking after the firm’s Annual General Meeting, the oil marketer’s General Manager for Kenya David Ohana added that improving the systems would also help alleviate fuel shortage that have been experienced in recent times.

Mr Ohana complained that marketers were unable to discharge more refined products because the tanks at the Kipevu storage facility were full.
“Our vessels are incurring huge demurrage bills every month because even the KPC system is full. But if the government decides to invest and increase the storage capacity (at Kipevu), we will be more than delighted to import more,” he maintained.

He blamed the fuel shortage that was experienced about seven months ago on this phenomenon and warned that the only way to effectively address this issue was to increase this capacity.

During the briefing the company disclosed that it would adjust its pump prices upwards at the end of May.

The General Manager said they would increase their retail prices by about Sh3 to Sh3.50 to match the international crude oil trends.

“The barrel as of yesterday (Thursday) was trading at $61.50, in the last two to three weeks we have seen a strong performance and this is something that should signal to you that price increase, for sure, will come,” he said.

“We will definitely increase our prices so if you are asking if the public should expect price increase, we are saying yes, very much,” he added.

Currently, a litre of unleaded super petrol at the Kenol pump stations is selling at an average of Sh76.90 after the company effected a Sh2 increment last month. Other marketers however did not follow suit.

At the same time, he said Kenol would support the decision to implement price controls in the oil industry although the long-awaited move might not be the best for the country.

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