State now to have say on oil firms' exports to regional markets

Clean water vehicles getting fuel refill at one of the Shell Petrol Stations in Nairobi [David Gichuru, Standard]

State now has say on oil marketers' exports to region to curb shortages

Oil marketing companies will now be required to seek approval from the government whenever re-exporting fuel to neighbouring countries.

The Petroleum ministry said it will have to okay the quantity of fuel imports re-exported in a bid to tame the oil firms’ preference for regional markets in the wake of the subsidy programme in Kenya that denies them upfront margins.

The ministry wants the oil marketers to adhere to the 60:40 ratio, where the domestic market gets 60 per cent of the fuel imports, with re-exports getting 40 per cent.

The government expects the directive to ensure the country has sufficient stocks. This comes in the wake of a biting fuel shortage earlier in the month as oil marketers diverted fuel meant for local consumption to the regional market.

“To enforce the directive by the acting Cabinet Secretary, the above ratios must be adhered to for all ships berthing at Kipevu Oil Terminal (KOT). In this regard, therefore, importers are asked to note that all discharge instructions (DIs) must be approved by both KPC (Kenya Pipeline Company) and the ministry before adoption,” said Petroleum Principal Secretary Andrew Kamau in an April 19 letter to oil marketers.

The export markets offer oil marketers upfront margins as opposed to Kenya where the stabilisation programme means they have to wait for more than a month before they can be compensated.

The recent supply shocks in the country were occasioned by delays in the government releasing funds owed to oil marketers under the subsidy programme, with the firms, in turn, hoarding or exporting more products than they have in the past.

Last week, Energy Cabinet Secretary Monica Juma had directed the oil firms to reallocate 10 per cent of the petroleum products that they had earmarked for export to the local market to help meet local demand.

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