State sanctions oil agencies as fuel prices go up by Sh10

Ten oil marketing companies could lose their licences as the government probes them for economic sabotage over claims of hoarding fuel and plunging the country into a fuel shortage.

The Petroleum ministry yesterday said it had issued demand letters to the companies, whose chief executives had also been summoned to record statements with the Directorate of Criminal Investigations (DCI).

This was a day after the deportation of Jean-Christian Bergeron, the chief executive of Rubis Kenya, as the government started cracking the whip on companies implicated in hoarding of petroleum products.

This is even as fuel prices went up by nearly Sh10 to hit historical high of Sh144.62 per litre of super petrol, Sh125.52 per litre of diesel and Sh113.44 per litre of kerosene in Nairobi. The high prices are despite the government subsidising retail prices by as much as Sh40 per litre of super petrol, whose price would have gone up to Sh173.70 without the subsidy.

Acting Energy Cabinet Secretary Monica Juma yesterday said the Energy and Petroleum Regulatory Authority (Epra) had demanded explanations from the OMCs. She said if found culpable of offences such as economic sabotage, a capital crime, they would be sanctioned, with the possibility of some of the companies losing their licences.

“Epra has issued show cause letters to those OMCs that failed to meet the required minimum operational stock levels and thus resulted in stock outs at their respective retail stations pursuant to the Energy (Minimum Operational Stock) Regulations of 2008,” she said, also confirming that the Rubis Kenya CEO already left the country on Wednesday evening.

According to sources, the French national was picked from his office on Wednesday evening, escorted to his home and within 30 minutes was hounded to the airport.

“The Ministry of Petroleum and Mining has filed the requisite complains with the sector regulator, competition authority and the state security agencies led by the DCI for all Oil Marketing Companies that have contravened the law by engaging in acts of economic sabotage.”

She talked tough, telling the oil marketing companies to either shape up or ship out but at the same time assuring them that they would be paid outstanding amounts the government owes them. Juma noted that while the oil firms are private enterprises, as licensees dealing with a commodity key to the economy, they have obligations that they have failed to fulfil over the recent past.

“The OMCs are here for a purpose, which is to provide service to Kenyans. This is about honouring their obligations to Kenyans, it is not about begging or favours,” she said, adding that government had facilitated the industry including heavily investing in common user facilities.

“It is not acceptable and will not be tolerated. You cannot hold the country at ransom… we will go to the full hog to bring all persons and companies who are in breach of their licensing and operating guidelines to book.”

Juma also said the Petroleum ministry had instituted mechanisms that are expected to see the fuel supply situation normalise by Sunday.

These include a directive to all oil firms to re-designate part of the fuel they planned to export to neighbouring countries for use in Kenya. Epra also reduced the import quota for oil marketers who have been exporting products at the expensive of the local market. Fuel transporters will also be allowed to load and transport fuel at night while retail outlets have been urged to operate 24 hours a day.

Yesterday, the Inspector General directed police to provide free movement and escort of all fuel transport tankers for the next 72 hours between 6pm and 6am, starting Thursday.

Juma also said Treasury had released the funds owed to OMCs and they would be paid once verification of their claims is concluded.

“With these measures are, we will be able to stabilise the supply within 72 hours,” she said.

Epra published price caps for the April-May pricing cycles, which saw prices of the three regulated products retail at the highest levels ever. This is despite employing the fuel subsidy that has been in place since April last year.

“In the period under review, the pump prices of super petrol, diesel and kerosene will increase by Sh9.90 respectively,” Daniel Kiptoo, Epra director general, said.

Super petrol will retail Sh144.62 per litre in Nairobi, with the government cushioning motorists to the tune of Sh29.08 per litre. Without the subsidy, motorists would have paid Sh173.70 per litre of petrol. Diesel has been subsidised by the biggest margin of Sh40.24 per litre and will retail at Sh125.50 in Nairobi as opposed to Sh165.74 per litre if it did not have the subsidy.

Kerosene will retail at Sh113.44 per litre, being subsidised to the tune of Sh26.45 per litre. Without the subsidy, kerosene would have retailed at Sh139.89 per litre.

Because of the subsidy, Kenya has the lowest fuel prices in the region owing to the move by government to cushion them from high cost of fuel.