By Macharia Kamau
Plans by Government to put up strategic oil reserves have started to gather momentum after the National Oil Corporation of Kenya (NOCK) began the search for a consultant to undertake a feasibility study on the modalities of developing national strategic petroleum reserves.
The reserves are expected to cushion the country from the frequent shocks in the global oil industry. The shocks have seen the country suffer acute fuel shortages and frequent spikes in pump prices.
In a paid-up advert yesterday, the State-run oil marketer invited bids for the feasibility study that will also see the development of a master- plan for the project.
Other than outlining the investments needed to develop the infrastructure for holding strategic reserves, the masterplan will also detail how the industry can deal with the constraints that dog petroleum distribution.
The need for strategic reserves has been in the works for the last two years, but recent increases in oil prices in the international markets and a shortage early this month that almost paralysed the economy have made it an urgent.
In 2008, NOCK was mandated to set up the infrastructure, including storage tanks, to hold strategic reserves. But it has been slow on implementation, which the ministry of energy attributed to lack of funds.
"To secure the country against unexpected supply interruptions, I published a legal notice in 2008 empowering NOCK to create strategic. This oil security contingency plan has faced financing hurdles largely due to many competing needs for scarce national resources," Energy Minister, Kiraitu Murungi, told an industry stakeholder meeting.
The prevailing high oil prices have also hurt the prospects of the project, since the Government expects public private partnerships to play a major role in the setting up of the
strategic reserves.
"Alternative financing options through private sector have been made difficult by rising oil prices and storage constraints," he said.
"I hope that this meeting will discuss the possible actions of addressing this critical challenge. These stocks are essential in shielding the country against any supply chain disruptions including rapidly escalating prices."
The minister recently said that the current cost of procuring strategic stocks that would last the country 90 days was estimated at Sh84 billion. A further Sh40 billion is needed to put up storage facilities to hold the petroleum products.
The meeting was was convened to look into possibilities of employing long-term solutions.
"The petroleum sub-sector is marred with numerous challenges and we are aware of the difficulties the entire economy is facing," said Kiraitu.
