Mombasa port losing appeal to oil marketers

By Macharia Kamau

Frustrated by an inefficient supply chain, some local oil marketers are turning to the Dar es Salaam port to keep fuel pumps flowing.

Importers, especially those in Rwanda, Burundi, Uganda and the Democratic Republic of Congo, are blaming the Kenyan distribution chain for erratic supplies to their depots.

Mr George Wachira, a consultant with Petroleum Focus, told Financial Journal that inefficient supply chain has lured oil firms to make imports through the port of Dar es Salaam.

"Importers from Rwanda and Burundi are using Dar es Salaam because of capacity hitches in the Kenyan pipeline and refinery," said Wachira.

"Imports through Dar gained prominence during the post-election violence when the route from Mombasa to the Great Lakes region was disrupted," he said.

Kenol Kobil, the largest oil marketer in Kenya and a market leader in six countries in the region, announced plans to use the Dar Port a fortnight ago.

The firm said it would import 50 per cent of oil products distributed by its subsidiaries in the region through the Tanzanian Port.

"The Tanzanian supply corridor is more reliable for supplies to Uganda, Rwanda, DR Congo," said Mr Jacob Segman Kenol Kobil group managing director .

However, some industry analysts dismissed Kenol Kobil saying it was a way of diverting attention from outstanding marketing issues with the Kenya Pipeline Company (KPC), the Mombasa-based Kenya Petroleum Refineries (KPRL) and the Energy ministry.

The limited capacity at the Kipevu Oil Storage Facility (KOSF) and poor performance of the KPRL and the KPC have been among the factors that make Dar port attractive.

Deliver products

Despite a multi-billion shilling enhancement project last year, KPC has been unable to effectively deliver products to the rest of the country, leaving western Kenya short of fuel regularly.

This has left Uganda, which accounts for 75 per cent of imports through Mombasa, to supplement imports through Dar by rail to Mwanza and then by ferry across the Lake Victoria to Port Bell near Kampala.

According to Wachira, logistical challenges dogging oil marketers are many.

He said though it is costly to import through Dar because country does not have a pipeline, the route is reliable compared to Kenya.

"It is cheaper for the three countries (Rwanda, Burundi and Uganda) to collect fuel from Eldoret and Kisumu than using Dar route," he said.

Secondary matters

"However cost considerations become a secondary matter when the supply chain is not reliable."

Kenyan oil marketers have also cited inefficiencies of the distribution system as being a major factor that has eroded their profitability.

Kenol Kobil posted a pre-tax loss of Sh431 million for the first half of the year. The performance was attributed to the unrealiable supply chain.

While announcing half-year results last week, Total Kenya noted that other than the volatile prices of crude oil, inefficiences of the local supply chain had affected its earnings.

The company reported a pre-tax profit of Sh55 million on Friday for the six months ending June, a significant drop from Sh903 million posted for the first half of last year.

"Our operations continue to be affected by KPC’s insufficient pumping capacity and erratic output at the refinery," said Total Kenya Managing Director Felix Majekodunmi.

An enhancement programme undertaken by the government that was supposed to see the pipeline double its pumping capacity from 440 cubic metres per hour to 880 cubic metres per hour is yet to improve the situation.

The industry is, however hopeful that things might turnaround at the refinery, Essar Energy acquired a 50 per cent stake at the KPRL from Shell, BP and Chevron. The Indian multinational plans to invest $450 million to upgrade the facility.

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