Oil marketers may in future be required to import all their petroleum products under the system supervised by the Ministry of Energy and Petroleum, according to new proposals by the government.
In a bid to mainstream the process of acquiring petroleum products and importing them to the country, the ministry has drafted regulations that will compel oil marketers to resell the fuel in the country through the Open Tender System (OTS).
The system is overseen by the Petroleum ministry and pools together monthly demand for all oil firms in the country, that are then consolidated and one firm competitively selected to import as one cargo.
Oil firms are however free to import cargo on their own.
The proposed Petroleum (Importation) Regulations, 2022, however, seek to “make it a compulsory requirement to import petroleum products through the Open Tender System (OTS) for efficient planning and to enable the country enjoy economies of scale”, according to a Regulatory Impact Assessment report published yesterday by Energy and Petroleum Cabinet Secretary Davis Chirchir.
The statement said the proposed regulations would have in place a framework to guide government to government arrangements for the acquisition of petroleum products.
At the moment, a successful bid for product importation through the OTS will stop buying from the open market. Buying directly from oil producing countries might mean enjoying discounts.
The report said the proposed regulations recognise “the need for Government to Government arrangement for importation of petroleum products which may enable the country negotiate for discounts on product cost and freight while at the same time enabling the country to access extended credit periods from suppliers. This will save the country from the current pressures on Foreign Exchange Reserves”.
The CS in the Gazette notice also said the planned regulations would make the OTS process transparent.
Despite its name that denotes openness, some players have criticised the process of selecting oil firms that get the job of importing on behalf of the industry as opaque and that it is partly to blame for exposing Kenyans to higher fuel prices.
In a recent petition to the National Assembly to probe the OTS, the Consumers Federation of Kenya (Cofek) said the payers do not make disclosures on all the costs involved and out of the about 100 oil marketers in the country, only 13 participate in the process.
The ministry believes these issues will be address by the regulations that seek to strike a balance between the interests of both the companies and consumers.
“The proposed Regulations seek to enforce the provisions of the OTS in ensuring that petroleum products are imported into the country in the most cost-effective manner. The Regulations will promote transparency by laying bare all costs involved in the petroleum import process and hence ensure prudence,” said the Petroleum ministry.
The ministry says the proposed regulations will also bring clarity and simplicity by consolidating and harmonising various legal notices touching on importation of petroleum products.
"As a consequence of all these changes, the general public will enjoy fair prices and security of supply of petroleum products,” says the notice.
“Petroleum importers will benefit from the proposed Regulations as they will enjoy economies of scale through common import planning and use of larger vessels, thereby making petroleum products imported through Kenya very competitive.”