Controversy stalks National Oil deals

The controversy surrounding the Sh75 billion in deals that are at the centre of the current storm at the National Oil has deepened.

This is after the Petroleum Principal Secretary said one of the projects had never been handed to the State-owned oil marketer.

The new PS Andrew Kamau, who also sits in the National Oil Corporation of Kenya (Nock) board, contradicted Government reports that had indicated the corporation was the implementing agency of a Sh50 billion jetty.

“The jetty has never been a National Oil project. It is a port facility under the Kenya Ports Authority,” he said in an interview on the sidelines of an energy event last week.

But several Government policy documents, including those presented to Parliament recently, show National Oil is the implementing authority of the jetty.

For instance, a performance report presented by immediate former Energy Cabinet Secretary Davis Chirchir to Parliament, as well as a medium term plan report on Vision 2030 indicate the project was being implemented by National Oil.

This is now set to raise questions on when the project was taken away from the oil marketer, given it had been mandated to spearhead some of the initial plans for it, including a feasibility study.

Financing options

National Oil has also been evaluating financing options, including Government equity participation and public-private partnerships (PPPs), for the project.

Sources indicate the ministry had wanted the project taken away from National Oil and given to Kenya Pipeline Corporation (KPC) on the grounds of financial muscle and expertise.

Contacted for comment, Nock CEO Sumayya Hassan-Athmani said she was not aware the jetty project had been taken away from her company as the implementing agency.

“The Single Buoy Mooring project is part of a bigger initiative to set up a petroleum trading and logistics hub in Kenya. This will enable us leverage the strategic geographical positioning of the country to create significant value, not only for Kenya, but for the region,” she told Business Beat.

The jetty, which is expected to make it possible to offload fuel imports from the high seas, is among three projects valued at about Sh75 billion that are behind the current boardroom wars at the oil marketer. The board and Ministry of Energy officials are fighting to wrestle these projects from the corporation.

They include a Liquid Petroleum Gas (LPG) project estimated to cost in excess of Sh14.5 billion and another Sh12 billion worth of Government fuel business a year.

The LPG project, which is understood to have Government backing, will see Nock import at least three million gas cylinders.

An insider told Business Beat there are already alignments on who will import the cylinders.

“Sumayya is seen as stubborn. She has resisted any deals to be cut around here. She is now being targeted if she doesn’t play ball. Whoever gets the contract to buy the cylinders will make big money,” the insider, a highly-placed source, said.

The gas project is being marketed as a pro-poor initiative aimed at making LPG the fuel of choice, and minimising the usage of biomass and kerosene to safeguard the environment.

“The plan was to provide a 75 per cent subsidy for the 3kg and 6kg cylinders and accessories to encourage uptake,” the source said.

The project needs Sh5.6 billion annually for administration and provision of discounts. It will see the development of a Sh4.2 billion jetty and import facility, storage, rail and road unloading, and a bottling plant at Mombasa. It will also see other storage and bottling plants built in Nairobi, Eldoret, Kisumu and Sagana at a cost of between Sh1.7 billion to Sh2.8 billion per location.

At least 1.3 million households are targeted to the given the cylinders by June next year, another 2.2 million in 2018 and 3 million in 2019, according to the project timelines.

But it is the Sh12 billion in Government fuel business every year handed to Nock following a State House directive that appears to have sealed Ms Athmani’s fate.

The Government directed all ministries and agencies to buy fuel lubricants and bitumen from the firm mid last year.

Business Beat has learnt that one of the board members brought a company to source for local purchase orders (LPOs) on behalf of the oil marketer at a fee.

“He wanted to be paid up to Sh4 per litre of all oil purchased by the Government. This was a rip off,” the source said.

It is estimated that the Government consumes about 20 million litres of fuel a month, which translates to about Sh1.2 billion, depending on the price of fuel.

This means the board member would pocket at least Sh80 million a month.

National Oil has more than 110 stations across the country and enough sales staff to deal with LPOs. It would not need the services of a third party.

“Many of the forward contracts signed by various Government agencies with oil marketers have started to expire, and the directive was supposed to be implemented from then. But now there is a lot of confusion. We do not know the direction it is going. There was also another letter written that purported to clarify that State agencies are not required to buy from us as a first priority any more,” the source said.

National Oil, which set up its first three flagship stations in 1997, has grown its retail footprint through acquisitions, long-term leases and franchising. It has a current inland retail market share of 10 per cent, up from 0.02 per cent in 2008.