Kenyan oil firm extends olive branch to KPRL

July 19, 2010

, NAIROBI, Kenya, Jul 19 – KenolKobil Limited has expressed its desire to amicably resolve the dispute with the Kenya Petroleum Refineries Limited (KPRL) over the latter’s decision to cancel the oil marketer’s processing agreement.

General Manager for Kenya David Ohana on Monday however maintained that the firm wants the matter to be determined through arbitration as stated in the contract between the two parties.

“We have a valid and running processing agreement with KPRL which can only be terminated under the terms stated in the agreement and disputes arising, in this case under the provisions of the Arbitration Act of 1996 under the English Law,” insisted Mr Ohana.

On July 12, a court ruled that KPRL was right to bar KenolKobil from processing crude oil at the refinery and declined to refer the matter to an arbitrator.

As a result, the company’s crude oil baseload is now being re-shared amongst other players, a move that the oil marketer said is unfair to the innocent parties that might fail to meet their processing obligations and thus affect product supply.

The dispute between the two parties has been long drawn, arising from the non payment of Sh456 million incurred as processing fees that were adjusted in 2006 and in 2008.

Kenol has in the two instances contested the 26 percent and 12 percent increments saying they were unjustified as the refinery is still inefficient. Citing reasons such as yield shifts, fuel loss and business as well as inefficiency issues, the firm filed a case in the High Court claiming damages amounting to Sh4.9 billion.

KPRL has however not acknowledged these issues and has refused to go to arbitration. As a result, Kenol now alleges that it is being victimised by the government and has seen two of its vessels; M/T ARGOSY and M/T TORM KANSAS carrying a combined output of 45,000 tonnes of refined products refused the right to berth.

This, they further claimed, has seen them pay demurrage costs amounting to Sh240 million in the two and one months that the ships have been delayed at the high seas respectively which the company said would eventually be passed on to the consumers.

“There are two ships out there, whose products are these? Isn’t it for the Kenyan people, the Kenyan and regional economy? At the end of the day, who pays for it?” Mr Ohana posed.

Although they feared that supplies might be affected, the GM ruled out the possibility of adjusting the fuel prices in the short term but warned that doing so would be inevitable in the long run.

The company’s Group Mergers and Regional Manager Patrick Kondo decried the treatment they were receiving saying it only served to portray Kenya as an unattractive investment destination and called on the government to intervene.

“It gives the impression that impunity is condoned. It gives the impression that the rights of investors are not respected. It gives the impression that commercial and contractual obligations are not respected,” Mr Kondo complained.

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