Consumers to wait longer for cheaper oil

By Benson Kathuri

Pressure is mounting on the Government to build another oil discharging facility at Mombasa port to save the oil industry billions of shillings lost daily as ship wait to discharge through the only existing oil jetty.

Oil marketers argue that oil prices could drop significantly if the Government acted fast and established another oil terminal to allow ships to discharge on schedule.

Currently, ships spend up to 15 days waiting to discharge through the Kipevu oil terminal that industry players insist is not only inadequate but also outdated.

The terminal that is expected to serve the country and the Great Lakes region was built in 1963 with little expansion and modernisation done since then.

Unfortunately, the new terminal is tied to the expansion of the entire port that may take years, a situation that might make it impossible for consumers to enjoy cheaper oil prices now prevailing in the global market.

"The Mombasa port is in need of expansion and the Government is trying to interest investors in this area called Dungu Kundu so that we can have more jetties there," Murungi told the FJ in an interview.

"As it is now, ships have to queue for them to discharge oil into Kipevu Oil Storage Facility and the demurrage costs are very high and these are contributing to some of the high oil prices in the country. We need more jetties. We need to expand our import facilities at the port."

However, Murungi is not sure when the jetties would be built saying they are negotiating with development partners, including the Japanese Government to interest them to fund the expansion programme.

Extra cargo

Total Kenya Managing Director Felix Majekodunmi said the Government could do more to ease the problem but the Government seems unable to raise additional funds to put up the jetties.

The Kenya Ports Authority (KPA) that operate the terminal insists that the terminal can handle the imports and instead blamed the Kenya Pipeline Company (KPC) and the Kenya Petroleum Refineries for the mess.

According to KPA, imported crude oil is supposed to be pumped directly to the refinery for refining while KPC is expected to provide storage facilities for any extra cargo. However, sources said the Government can address some of inefficiencies identified in the oil supply chain by upgrading the old and outdated oil refinery that have failed to cope up with rising oil demand locally and in the region.

Oil shortages

The recent multi-billion shilling pipeline enhancement project completed last year need to be re-evaluated to establish whether it has met its objectives.

However, with demurrage charges ranging between US$30,000 (Sh2.4 million) to US$36,000 (Sh2.8 million) per day, Majekodunmi is concerned that pump oil prices might not drop in tandem with the fall in crude oil prices. "Consumers have questioned why we are quick to adjust prices upwards when crude oil prices rise and not so fast when the reverse happen. These are some of the issues to consider," he told an investment forum in Nairobi last week.

During the height of oil shortages in December and January, eight ships were queuing at Kipevu to discharge the products.

In an effort to escape port and berth charges by the KPA, the ships were forced to recede to the high seas where they continued to pay demurrage charges running into millions of shillings.

When the issue arose three years ago, the Government opted to reopen the Shimanzi oil terminal that is currently used to discharge imported refined products but the problem has persisted.

The Shimanzi berth cannot accommodate large ships that carry up to 80,000 tonnes of crude that must queue at Kipevu for as long as it takes.