Kibaki crisis talks fail to end petrol shortage


The shortage of petrol entered the fourth day on Thursday, even as President Mwai Kibaki rallied ministers to assure the public that matters were under control.

Motorists queued at petrol stations, blocking roads and creating long jams on the roads. Petrol station owners rationed fuel, in many places selling no more than Sh500 worth of fuel to any one motorist.

Energy minister Kiraitu Murungi conceded that the energy sector is in a mess and proposed a stakeholders’ meeting to decide the way forward.

But the fuel shortage crisis exposed how Soviet era over-regulation by the government on the one hand, and aggressive profiteering by oil companies on the other, have created a vulnerable supply chain.

The result is a system which is incapable of responding quickly even in crippling shortages such as the one being experienced now.

Since October last year, the ministry of Energy introduced regulations prohibiting imports of oil outside the ministry of energy-coordinated Open Tender Supply system (OTS).

Under this system, all oil imported into the country, including fuel headed for neighbouring Uganda and Rwanda, must come into the country by one ship, imported by one player and shared by the rest according to market share.

With private imports by individual marketers restricted, all players must patiently wait to get supplies from the next OTS tender, even when their customers want more.

The only exception are the rare cases where politically-favoured  importers are allowed to bring in product from outside the system.

Access to the only pipeline is regulated by an ullage committee under the oversight of the ministry of Energy.

In Nairobi, truck loading facilities are only available to five players, implying that fast movement of products from Kenya Pipeline Corporation’s systems to petrol stations by using trucks is difficult even during emergency situations such as Nairobi is experiencing at the moment.

And, all oil marketers must, by law, support the Kenya Petroleum Refineries by importing a volume of crude, depending on individual market share. In total, the refinery is guaranteed a total of 1.6 million tonnes of crude a year.

It is partly because of these in-built rigidities that oil companies are unable to increase supply, even though there is fuel in the country.

Oil companies are required to pay taxes before they are allowed to remove their fuel from KPC depots, which is also contributing to the delays.

Then are the cases where millions of litres of fuel is held at KPC depots in Nairobi because the importers have not paid their financiers as required under the so- called collateral financing arrangements.

On Thursday, energy minister Kiraitu Murungi  admitted that a one-week shut down of the refinery had delayed delivery of 8 million of litres into KPC’s system.

He also disclosed that KenolKobil had not delivered 7 million litres of petrol it was supposed to bring in under the OTS system  for the month of March.

The OTS import for the month of April by Gulf Petroleum amounting to 29 million litres of petrol had also been delayed for five days.

So rigid is the supply side that any small hitch in the supply chain is enough to precipitate a major crisis.

On Thursday, the President summoned top Treasury and Energy officials and ordered them to ensure that the shortage is dealt with immediately.

Mr Murungi addressed two press conferences but could not provide an assurance that the crippling shortage would not recur.

Mr Kibaki had ordered all government agencies to work together to ensure that it does not happen again, noting that an efficient fuel supply chain was critical to the country’s economic and social development.

President Kibaki also asked the relevant ministries to take steps to cushion Kenyans from high fuel costs.

But speaking to journalists, Mr Kiraitu said: “There would be no assured guarantees that similar occurrences would be avoided because the government does not import any oil, we rely entirely on the oil-marketers.”

He explained that after KenolKobil supplied seven million litres less than required in the tender and eight million litres were delayed at the refinery, the mess in the oil importation continued into April when a five-day delay was experienced in the delivery of a further 29 million litres of super petrol.

“We have had extensive consultations on this issue and we expect that it will normalise by end of the day tomorrow (Friday),” he said. With the explanations, came a raft of proposals the minister said will help clean up the supply chain in the future.

This will include a reduction of days from 30 to 10 by which marketers would have to clear with the Kenya Revenue Authority to have access to their products.

Petroleum products imported under collateral financing with commercial banks will also have to be cleared in 15 days from the current 30 days.

However, these measures will have to be gazetted before becoming effective.

In a circus that has crippled the oil industry, the minister also accused the oil marketers of taking the country hostage.

“The marketers failed to pick the product so that they do not pay taxes after the government announced reduced prices for kerosene and diesel,” he said.


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