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Fuel: Kibaki orders action on shortage, prices

BUSINESS
By | May 6th 2011

By Macharia Kamau and Morris Aron

President Kibaki summoned and ordered Energy Minister Kiraitu Murungi and Finance Minister Uhuru Kenyatta among other top State officials to immediately deal with the fuel crisis strangling the economy. He issued the presidential order, given the magnitude of the problem attributed to alleged plot by oil marketers to blackmail the State into scrapping price controls in the industry.

Indeed, State officials fell short of accusing oil marketers of sabotaging the economy and even threatened that it could cancel licences of stubborn oil dealers.

The President’s directive came as it became evident oil marketers held the country to ransom in the past week by intentionally not stocking up their outlets.

Desperation over current fuel crisis was discernible from the strain of these men as they pushed their stalled car to a petrol station in Nairobi. [PHOTO: John Muchucha /STANDARD]

Kibaki’s intervention follows acute fuel shortage that began on Sunday with a number of petrol stations across Nairobi and upcountry running dry. Only a few fuel stations were getting intermittent supplies, a situation that Thursday appeared to be improving even as a series of crisis meetings were held to address the problem.

National strike

The confusion in the oil industry that has weighed down on the economy prompted Kibaki to summon the ministers to his Harambee House office and give them express instructions to deal with the crisis that sources in Government revealed was now being seen as a serious security issue given rising public disenchantment and threats of a national strike by trade unions.

A statement released by Presidential Press Service said Kibaki, "directed the Energy and Finance ministries to ensure fuel supply returns to normal countrywide."

He instructed the two ministers to work with other stakeholders and relevant Government agencies "to ensure that there will be no future supply interruptions caused by circumstances under Government control."

It did not specify the action the State may take to ensure the problem does not recur but it is believed it would be both drastic and punitive.

And despite the agony Kenyans have gone through over the last week at the hands of oil marketers, the Government did not announce any measures to instill discipline in the oil industry.

"It is true the oil sector is controlled by very few companies that like to maximise their profits, but it is our duty to protect Kenyans. We have the Energy Regulatory Commission (ERC) and the Monopolies Commission to monitor them so if any of them breaches the Energy Act, we are ready to cancel their licenses," Kiraitu threatened at a separate news conference.

The minister promised a long-term solution, saying he will convene an meeting to develop a master plan for the sub-sector . "I intend to convene a stakeholders meeting within two weeks to develop a comprehensive plan of action for the development of petroleum supply and distribution chain infrastructure."

Kiraitu first addressed a press conference at his offices and later attended the weekly briefing by Government Spokesman Alfred Mutua where he repeated his explanation.

"I know some marketers have not been happy with the price regulations and obviously would like to play some tricks to force us to review or remove the controls altogether. But if we remove them, then there would be more demonstrations from the citizens because of the high fuel prices," he said. The PPS statement said Kibaki also gave instructions to relevant ministries to cushion Kenyans against the effects of high fuel costs.

The President’s instructions came as the Energy minister admitted Kenya’s oil industry exists in a permanent state of crisis. Kiraitu fell short of admitting that oil marketers are holding the country hostage. "The industry has been operating in a situation of permanent crisis...last week it was the retail and this week has been stock outs," he lamented.

He, however, appeared to justify Government’s inability to control the sector by restating that the economy operates on the principles of a free market.

The Minister could also not guarantee that similar blackmail or standoffs would not recur. Kiraitu and the Kenya Pipeline Company (KPC) had earlier asserted that oil marketers had failed to collect Super petrol from storage facilities in Nairobi.

Kiraitu outlined more factors that, he said, had resulted in an acute shortage of Super petrol in Nairobi, a situation that has been worsening by the day and spreading to other parts of the country, but has since shown signs of easing.

He listed an electrical fault that caused a breakdown at the Kenya Petroleum Refineries Limited (KPRL), an under-delivery of the March industry cargo by oil marketer KenolKobil and delay in arrival of the April industry cargo, as the cause of the current shortage.

Despite the new reasons offered by the Minister, he still insisted marketers did not make any requests to pick fuel from KPC depots in Nairobi on April 29 and May 2,

Oil marketers had earlier in the week cited the inefficiencies that characterise the oil distribution system as the cause of the shortage that started in Nairobi on Sunday.

Kiraitu, however, said the situation should normalise in the course of today, following the replenishing of retail outlets by oil marketers.

"The total volume of Super petrol transferred to oil marketing depots in Nairobi between Tuesday and today (yesterday) morning is 7.3 million litres. Transfer of additional volume is being enhanced as requests are enhanced by KPC from oil marketers," he said at a press briefing attended by KPC and KPRL senior staff.

According to the minister, the electrical fault at the Mombasa-based refinery disrupted one of the refining lines and made it impossible to deliver eight million litres of Super petrol by April 30.

Importation shortfall

Though the refining line has been brought back online, KPRL is yet to deliver the eight million litres.

KenolKobil is also on the spotlight for failure to fully deliver a March industry cargo. The company, which was importing under the Open Tender System, brought in seven million litres short of what was tendered.

The minister also said there was a five-day delay of a 29-million litre import that was scheduled to arrive on April 20, but came April 26 and discharged towards end of last week.

Fuel cargoes of other marketers who may not have paid up for their products and relevant taxes have also been clogging the system. Some of the products are being held as collateral — where under collateral financing the product cannot be released until the market paid up their financiers.

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