Kenya Pipeline Company in Sh40b plan to take fuel to counties

Five major towns have been selected to host fuel storage tanks where delivery lines will terminate, in an ambitious expansion with a projected cost of over Sh40 billion.

Kenya Pipeline Company has said Busia, Migori and Taita Taveta towns have been considered, while a further decision will be reached between Nyeri or Laikipia in Central Kenya, and either Bomet or Kericho in the South Rift.

The State-owned firm hopes that the extension of the pipeline would help reduce the cost of moving petroleum products to Sh5 per kilometre for every 1,000 litres, down from Sh8 by road ­­— according to an initial study.

Kenya Pipeline Company Ltd depot off Jogoo Road in Nairobi. The firm wants to extend the pipeline to other counties. (PHOTO: BEVERLYNE MUSILI/ STANDARD)

“Reduction of transportation of petroleum products by trucks hence reduction in road damage, safety and environmental degradation,” the report says in part.

KPC has previously announced it was in consultation with county governments where the respective towns, who have been requested to consider developing the storage facilities and lease them back to the firm at a fee.

As an alternative, the firm would fund the entire expansion including the extended pipeline and the storage tanks. It has already been determined that the pipeline for the petroleum products would be 12-inch in width.

And yesterday, the firm issued an expression of interest inviting local and international consulting firms to undertake a comprehensive feasibility study and design of the planned pipeline.

Yesterday’s invitation is the clearest indication yet about the aspirations of the firm, coming in the midst of cries from the public that the slump in global oil prices was not translating to cheaper petrol and diesel at home.

In KPC’s projections, taking the petroleum depots to the five towns —including border crossing points of Migori and Busia, will yield cheaper transportation costs. Such savings should translate to lower pump prices, even though the eventual pricing is determined by the Energy Regulatory Commission using a predetermined formula.

In ERC’s formula, a total of Sh11 per litre is allowable for the players along the supply chain while retailers in far-flung towns charge up to Sh16 more per litre. A litre of super petrol sells at a maximum of Sh85.34 in Mombasa, compared to Sh102.45 in Mandera under the prevailing pricing unveiled by the ERC, with the difference being attributed to the distance from the sea port.

But this expansion, dubbed as devolution by KPC, is not the only mega-billion project that is being undertaken by the firm.

Corruption scandals

In June last year, the then newly-appointed corporation chairman John Ngumi announced that six commercial banks had been contracted to provide funding estimated at Sh43 billion. The funds would be used to develop a newer and much larger pipeline linking Mombasa to Nairobi, replacing an obsolete that is often experiencing breakdowns.

Mr Ngumi, alive to the corruption scandals at the firm, then promised that KPC would never have another theft by its managers, as had been the case many times over.

Joe Sang, the acting managing director of KPC, for instance took over from Flora Akoth who had been holding brief since early 2015 following the sacking of Charles Tanui.

While the KPC board was silent on the reasons for Akoth’s dismissal earlier this month, Tanui and the previous boss Selest Kilinda were dropped over corruption-related claims. The same fate had befallen their three predecessors.