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Marketers protest firm's move to 'sneak' in fuel during Christmas

By Macharia Kamau | Jan 4th 2022 | 5 min read
By Macharia Kamau | January 4th 2022
A segment of the industry has now protested what it terms as illegal importation and discharge of the super petrol cargo. [iStockphoto]

As Kenyans retreated for the Christmas break, some oil industry executives may have taken advantage of the lull and the possibility of relaxed scrutiny to side-step processes used in the importation of petroleum products in the country, according to a section of the industry.

The result is the alleged non-procedural berthing of a ship tanker at the Port of Mombasa and the discharge of some 30,000 metric tonnes of super petrol.

The vessel - MT Jag Prarena - arrived on December 24 and started discharging fuel ahead of another ship - MT Sloane Square that had arrived in Mombasa on December 13.

A segment of the industry has now protested what it terms as illegal importation and discharge of the super petrol cargo. It even accused the Petroleum Ministry of watching as a few favoured companies flouted the law.

The industry players say the importation, berthing and discharge of private cargo (fuel) is against provisions of the Petroleum Act that prohibits private imports of refined petroleum products using State-owned common user facilities.

The law requires players to import through the Open Tender System (OTS), which is supposed to take care of all industry requirements.

Through the Oil Marketers Association of Kenya (Omak), the players say the vessel that imported the cargo was given preferential treatment, bypassing other ships that had lined up to discharge fuel products through the Kipevu Oil Terminal (KOT).

Four vessels, including MT Sloane Square, were to discharge different cargoes of diesel, super petrol and jet fuel but had to give way to MT Jag Prarena. They will now penalise Kenyan consumers for being kept waiting by imposing a waiting charge referred to as demurrage.

“We note with great concern the illegal importation of 30,000 metric tonnes of gasoline by Gulf Energy Ltd for an ‘elite’ group of oil marketers without the knowledge of the other oil marketing companies,” said Omak chairman Abdi Ali Salaad in a December 31 letter to Petroleum Principal Secretary Andrew Kamau.

“We wish to further note that the timing for both the arrival and discharge of the cargo is not only suspect but was meant to never have been found out due to the festivities. Unfortunately, this has been discovered.”

The Petroleum Act that came into place in 2009 outlaws private imports for refined petroleum products into the country.

The Act requires the Ministry of Energy and the Energy Regulatory Authority (Epra) to oversee the importation of petroleum products through the Open Tender System.

The system allows the lowest bidder on any given product to import on behalf of all the other oil marketing companies.

“As the custodian of the OTS document, we believe that the Ministry should continue protecting the authority of the document. Allowing such imports undermines the document and can easily lead to acrimony in the oil industry,” said Omak in the letter.

The lobby is demanding that the ministry investigate and explain the mystery cargo, in particular when the tendering process was undertaken, how the importer was selected and the firms that are expected to benefit from the diesel cargo.

However, Petroleum Principal Secretary Andrew Kamau said the petroleum products had been imported within the provisions of OTS. He added that the issues that could have arisen may be due to misunderstanding of how the OTS works among some players or even differences among themselves.

He explained that the cargo in dispute was part of a tender that Gulf Energy had won earlier. The firm had requested the industry to allow it import in different batches.

The 30,000 metric tonnes of super petrol was the second cargo.

“Once they have been awarded the OTS tender, the modalities of delivering the products is up to the marketer. It might be through one ship or multiple ships as long as the other oil markers are in agreement. A request to deliver in more than one batches is made during the vessel scheduling meeting (VSM), which in this case was done and approval given. The quantity and price however do not change,” he said, adding that the oil marketers – including members of Omak – had representation at the VSM meeting that gave the vessel Jag Prerana the go-ahead to discharge ahead of the others.

“I fail to understand the issues they are raising in the letter. Is it that they wanted to buy the fuel but denied the opportunity or that they did not want Gulf Energy to import?”

He said at the OTS, the government acts as the referee in overseeing the tendering process, adding that everything else is in the hands of the oil marketers.

The communication among the oil industry and State officials show that the firms had given Gulf Energy the go-ahead to discharge. Oryx Energies, the firm that has imported the diesel cargo on the vessel Sloane Square and was next in line to start discharging had written to the Petroleum Ministry saying it “has no objection to the berthing of the subject vessel”.

In a follow-up email where Gulf Energy is requesting the Kenya Pipeline Company to confirm there is adequate storage space before the ship started discharging, the firm also notes that at the VSM meeting, it was agreed that its cargo be discharged first to add on to the super petrol stocks to avoid shortages.

It noted that the cargo was meant to “bridge the gap and avoid a possible stock out” of petrol in the country.

Omak also noted that the vessel that brought the fuel displaced other ships that should be discharging petroleum products at the Kipevu Oil Terminal. This could result in supply hiccups over the coming weeks.

At the government-run oil facility, only one tanker can discharge at a time, and whenever vessels are waiting to discharge products, they penalise Kenyans by charging demurrage fees.

The Kenya Ports Authority is in the final stages of building a Sh40 billion floating terminal that will allow four vessels to discharge at a go, cutting demurrage charges. “The vessel that should be discharging currently is the MT Sloane Square delivering gasoil and is now sitting outside while demurrage is accumulating, who will pay for this demurrage?” poses the association in the letter to PS Petroleum.

It added that “Epra should not allow demurrage related to the next four vessels that have already arrived at the port of Mombasa be passed to the Kenyan consumers”.

Sloane Square, which has been waiting to discharge since December 13, is bringing in 86,000 metric tonnes of diesel. Other vessels that are queuing to offload are MT Front Future that has 85,000 metric tonnes of super petrol, MT Alpine Confidence (78,000 metric tonnes of jet fuel) and MT Apostolos II (86,000 metric tonnes of diesel).

In a report to the National Assembly following a probe into the high cost of fuel in the country, the Finance and National Planning Committee said different vessel owners were paid Sh1.3 billion in demurrage charges between January and August 2021.  

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