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Kenya Pipeline in quest to raise storage fees for oil marketers

Fuel tankers at the loading area of Kenya Pipeline Company's Eldoret Depot. [Kevin Tunoi, Standard]

The Kenya Pipeline Company (KPC) has applied for an increase in the charges that oil marketing companies pay to use its network of pipelines and storage facilities.

The company in a tariff application to the Energy and Petroleum Regulatory Authority (Epra) is eyeing higher fees from oil firms in a bid recovery of the funds it spent building the new Mombasa-Nairobi pipeline. The pipeline tariff is reviewed every three years, with the most recent review undertaken in 2019.

Epra in the review reduced the charges oil marketers importing products for other regional markets using the Kenyan route pay to KPC while marginally increasing charges for local players.

The regulator at the time argued that Kenya needed to regain and protect the market share it had lost to Tanzania, with oil dealers in markets such as Rwanda, DR Congo and parts of Uganda increasingly preferring Tanzania over Kenya due to higher costs.

Epra said it had received a tariff application from KPC in January this year for the period between 2022/23 and 2024/25. KPC revised the application in July to factor in the recovery of costs incurred in building the new pipeline.

“KPC further submitted an amended tariff application on July 18, taking into consideration capital expenditure for capacity enhancement for the eastern (Mombasa-Nairobi) section of the pipeline and the proposed revised throughput forecast,” said Epra in a notice to stakeholders yesterday.

The regulator said it would subject the tariff application to public participation between August 22 and September 7. The new pipeline started operations in 2019 and was built at a cost of Sh48 billion.

The regulator in the 2019 review set the rate at $39.84 (Sh4,780 at current exchange rates) per 1,000 litres oil marketers picking products meant for export markets at its Eldoret terminal over the 2019/20 tariff period, with near similar rates for Kisumu and Nakuru terminals.

This would progressively reduce to $36.22 (Sh4,270) per 1,000 litres over 2021/22. This was a reduction from $60 (Sh7,080) in the previous tariff. For local players picking products at KPC’s Industrial Area depot, oil marketers paid a rate of Sh2,281.50 per 1,000 litres in 2019/20, which has gone down to Sh2,074.50 per 1,000 litres in 2021/23.

The pipeline and storage tariffs, just as is the case with other costs of delivering fuel to consumers, are usually transferred to motorists in the form of higher pump prices.