Banks’ debt freeze on Nock cripples plan to import fuel stocks
Crude Oil Tanker 'Nan Lin Wan' discharges petroleum products at the KOT 2 in Mombasa on May 11, 2023. Commercial banks’ decision to suspend credit lines to the National Oil Corporation of Kenya (Nock) has crippled the State’s plans to import a third of all fuel products into the country.
Commercial banks’ decision to suspend credit lines to the National Oil Corporation of Kenya (Nock) has crippled the State’s plans to import a third of all fuel products into the country, a parliamentary committee has said.
The National Assembly’s Energy committee said the banks’ decision to freeze lending to Nock has occasioned an accumulation of Sh1.4 billion in pending bills.
The committee wants the National Treasury and the State Department for Petroleum to renegotiate with banks to reverse the suspension of credit lines to Nock to enable the corporation to execute its mandate.
“The 30 per cent fuel importation and distribution share of the National Oil Corporations of Kenya has been impaired by its inability to access credit for its operations, which further has led to the corporation having pending bills amounting to Sh1.4 billion,” said the committee chairperson Vincent Musyoka, in a report on the budget for the Petroleum department for the year 2023/24.
The government last year tabled regulations to allow Nock to ship in 30 per cent of Kenya’s super, diesel, kerosene and cooking gas. The imports will be used to provide strategic stocks for the country and avert shortages mainly due to global market disruptions.
The Draft Petroleum (Importation) (Quota Allocations) Regulations, 2022 are aimed at boosting Nock’s cash flows.
“The Petroleum Products Quota Allocation shall be imported by the National Oil Corporation of Kenya,” read the draft regulations that were published by Energy and Petroleum Regulatory Authority.
Nock lifeline
The proposed changes, if approved, will hand Nock a lifeline as growing losses hurt its efforts to keep pace with competition from well-funded multinationals like TotalEnergies, Rubis and Vivo Energy.
Nock slumped into a Sh689 million loss in the six months ended December 2022 and its chief executive Gideon Morintat told Parliament that its full-year losses are projected to be Sh1.4 billion.
The firm was formed to stabilise and influence pump prices but has been forced to follow the dictates of the market controlled by the multinationals. Vivo Energy controls 21.7 per cent of the market followed by Total Energies at 16.4 per cent and Rubis at 8.6 per cent.
Nock was locked out of a lucrative government-to-government deal for the importation of oil after Gulf oil companies rejected a proposal to use the cash-strapped parastatal to import fuel on credit, forcing the State to allow them to nominate their preferred dealers.
Local banks issuing letters of credit also rejected the idea of issuing financial support to the cash-strapped State-owned fuel marketer, ultimately locking it out of the running for the deal.
