NAIROBI, Kenya, Dec 7 – The Ministry of Petroleum and Mining has named Hudson Andambi the interim Managing Director of the Kenya Pipeline Company (KPC), hours after the arrest of Joe Sang and four other officials.
Principal Secretary in the State Department for Petroleum, Andrew Kamau, said the appointment was made following consultations with the company’s board Chairperson, John Ngumi.
“The appointment is to ensure that operations continue without interference for purposes of ensuring security of supply of petroleum products,” Kamau said Friday morning.
Sang’s arrest is linked to an investigation into alleged corruption in the construction of a Sh1.8 billion Kisumu Oil Jetty.
His arrest came barely three days after the KPC board invited the Directorate of Criminal Investigations (DCI) to probe claims of dubious spillage reports that may have seen the company lose over 20 million liters of fuel estimated to be worth Sh2.3 billion.
The board also said Sang had tendered a letter to the effect that he would not seek to have his tenure as Managing Director renewed, the management team commencing a recruitment process to replace him.
“The board acknowledged Mr Sang’s contribution during his tenure and welcomed his assurance of full cooperation during the transition,” Ngumi announced Tuesday.
Reports of stage-managed stock declarations emerged in October after ten leading oil marketers demanded to have independent experts counter-check KPC’s spillage reports that had over time been inflated and the cost subsequently transferred to consumers.
The oil marketers adopted the tough stance while declining to transfer the burden of 11 million litres to consumers that had been declared as spillage.
KPC had indicated that 7.2 million litters spilled while another 4.4 million was stolen.
In a resolution by the board dispatched to media houses ton Tuesday, oil markers were allowed to conduct a forensic stock audit by December 31 to ascertain the claims of misleading spillage reports.
KPC has been tainted by reports of corruption scandals, the recent being the fuel conveyor’s plan to pay Sh4.4 billion to Zakhem Construction, a firm awarded a Sh48 billion tender to build a 20-inch Mombasa-Nairobi pipeline, as compensation for delays.
The Lebanese firm had been given eighteen months to complete the new line when it won the tender – albeit under contested circumstances – in 2014.
The contractor sought an additional Sh11 billion for the project in 2017 further delaying the delivery of the critical infrastructure to June 11, when the 450km line delivered the first batch of fuel to KPC’s depot in Nairobi.
The 20-inch line is expected to complement supply of fuel not only in Kenya but the region whose demand is projected to rise to 11.4 billion litres by 2020, according to KPC.
A 14-inch line built by Zakhem Construction at the cost of US$100 in 1975 has a capacity of 450,000 litres per hour compared to an upward of 750,000 litres per hour the new pipeline will be able to transport.
KPC has also been on the spotlight for allegedly reneging on a financing agreement between Zakhem Construction and banks that financed the new pipeline project.
According to Ecobank, KPC had backtracked on an agreement to pay a Sh5.2 billion loan owned by the construction company.
The tussle had High Court Judge Mary Kasango on Friday order bank accounts held by the firm frozen, further directing KPC and Zakhem Construction to release a sum of US$ 484 to Ecobank.
Justice Kasango had issued similar orders in July restraining Zakhem Construction subsidiaries in other countries from claiming or transferring funds held by the Kenyan subsidiary.
The order, popularly known as a Mareva Injunction in legal jargon sought to compel Zakhem Construction to honour an agreement reached in July 2014.
The bank had told the court that a financing deal had been inked on the premise that KPC would remit 70 per cent of Sh20 billion payable to Zakhem Construction directly to an Ecobank account held by the firm in Nigeria.