Deal struck to end high fuel costs

September 23, 2010

, NAIROBI, Kenya, Sep 23 – KenolKobil will now be able to refine its oil at the Kenya Petroleum Refineries Limited (KPRL) in Mombasa following an amicable agreement with the government.

Energy Permanent Secretary Patrick Nyoike said on Thursday that this would address the fuel shortage currently being experienced in the country as a result of the dispute between KenolKobil and KPRL over the latter\’s decision to cancel the oil marketer\’s processing agreement.

He said a deal had also been reached between KenolKobil and Kenya Pipeline Company to enable the marketer to pay up the entire amount owed to the refinery.

"Because of the urgency of this matter, effective tomorrow (Friday), KenolKobil will have its license reinstated or granted by the Energy Regulatory Commission to enable them start processing crude oil. Because their market share is about 18 percent, their volume is equally large," he said.

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 base load is now being re-shared amongst other players, a move that the oil marketer said was unfair to the innocent parties that might fail to meet their processing obligations and thus affect product supply.

"Those random imports have been the cause of ullage constraints so what we have decided to do is to ban those random unscheduled imports," he added.

The dispute between the two parties has been a long drawn one and arose over the non-payment of Sh456 million incurred as processing fees that were adjusted in 2006 and in 2008.

KenolKobil had in the two instances contested the 26 percent and 12 percent increments saying they were unjustified as the refinery was 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.

During the press conference, the Energy PS further pointed out that the dispute between KenolKobil and the Kenya Pipeline Company had been resolved.

"Yesterday\’s (Wednesday) meeting was with the pipeline which again has had major disputes with KenolKobil as you know. That dispute was resolved and as a result of that resolution, KenolKobil signed a transport and storage agreement with the pipeline effective immediately," he said.

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