Who is fooling whom as motorists stare at another major fuel crisis?

Fuel tankers lining up at the Kenya Pipeline Company depot in Eldoret.  [Peter Ochieng, Standard]

Kenya’s fuel supply situation remains bleak, with the country a few days away from a stockout and possibly a full-blown crisis, even as petroleum storage facilities remain full.

This is due to some oil marketing companies holding huge stocks of petroleum products in the Kenya Pipeline Company’s (KPC’s) facilities that are earmarked for re-export to neighbouring countries.

As of Wednesday last week, there were some 46.8 million litres of super petrol meant for consumption locally, enough to last the country eight days and another 64.64 million litres of diesel that could last 10 days.

On the other hand, there were 70.3 million litres of fuel that were meant for transit and could last the re-export market 19 days, going by the amount of fuel they uplift from the Kenyan system on a daily basis.

The transit stock for diesel stood at 61.77 million litres, enough to last the export market 15 days. The government has insisted on a local to transit ratio of 60:40, but the opposite has been true going by these volumes.

The super petrol that had been earmarked for local consumption stood at 39.8 per cent, while 60.2 per cent was meant for export. Diesel was at 50:50.

The information is contained in a report that came out of a meeting of industry stakeholders that was convened by the Petroleum Ministry.

“From this data, the forum noted that the local stocks are insufficient to cater for the market,” says the report. Industry sources claimed that some of the firms – a number of whom do not have retail outlets in Kenya – have accumulated products in the KPC system, a huge proportion of which is meant for export.

The Petroleum Ministry, however, allayed fears of any shortage, noting that the stock position had improved by Thursday.

According to data by the Energy and Petroleum Regulatory Authority (Epra), there were enough stocks of super petrol (144.6 million litres) to last both Kenya and its neighbours 15 days, while those of diesel (152 million litres) can go for 14 days.

There is enough stocks of super petrol (144.6 million litres) to last both Kenya and its neighbours 15 days. [Boniface Okendo, Standard]

The report, however, does not show how much of this is meant for the local or export market, with industry sources noting when these demarcations are made, the supply situation remains the same.

Additionally, the Epra report shows, there was a vessel that was discharging 120 million litres of super petrol at the time at the Kipevu Oil Terminal. Another four ships were set to discharge more than 320 million litres of diesel.

Notable, however, is that while there are huge cargoes of diesel that are expected to be discharged into the Kenya storage systems between now and May 22, there are none for super petrol, which could point to an unstable supply in the coming weeks for super petrol users.

“Kenyans are staring at another shortage in the coming weeks because the country’s storage system is choked with transit material,” said an industry source. “The owners of these products are not lifting them fast enough because this is dictated by demand in the market. The market can only absorb so much. If one person is holding traffic, the whole system chokes. The result is that the ships take longer to discharge.”

Petroleum Principal Secretary Andrew Kamau told Financial Standard that the fuel stocks are adequate, adding that firms that hold their stock at the KPC systems pay penalties whenever their products overstay at the facilities.

He said the situation last Wednesday had been superseded by events, using the Epra data to demonstrate that the situation had improved.

Mr Kamau added that it is in the interest of the oil marketers to evacuate products from the KPC system as soon as possible to avoid being penalised for overstayed products (demurrage charges). “There is an agreement with KPC, and they (OMCs) pay a penalty for every day they overstay,” he said.

KPC depot along Jogoo Road, Nairobi. [Beverlyne Musili, Standard]

But our source explained that a number of those who have hogged space at KPC’s systems include oil marketing companies without retail outlets in the country, and their cargoes are primarily transit.

“The fuel belongs to traders or people using the pipeline as a trading platform, and it is coming at a cost to Kenyans… there are more than 50 oil marketers with products in the system, some of them doing 100 per cent transit,” said the source

While the problem of having huge stocks of petroleum products meant for export in KPC’s systems has publicly come to light recently, it appears to have been in the making for some time.

In February, the Kenya Revenue Authority (KRA) noted a scenario where re-export products were overwhelming the local supply.

“We have noted with a lot of concern the recent changes in local or transit rations that have dropped 44/56… where transit petroleum products are more than the local allocations imported through Kenya,” said KRA in the February 23 letter to the Supply Coordinator, warning the importers of the petroleum products over the month that they would not get an extension on transit period and should exit the Kenyan system within 30 days.

Other than the players choking up the system, other factors that have contributed to the precarious situation include the decommissioning of the old Mombasa-Nairobi pipeline as well as preparations to commission the new Kipevu Oil Terminal.