Financial blow for rogue oil marketers as State approves sanctions

People queue to buy fuel at a filling station.

People queue to buy fuel at a filling station. 

Photo credit: Joseph Kanyi | Nation Media Group

A clique of oil marketers faces financial losses after the state approved chops on their import quota allocations as punishment for abetting a petroleum crisis through higher exports, despite shortages in their domestic retail outlets.

‘No objection’

The Petroleum ministry on Tuesday gave a nod to the Energy and Petroleum Regulatory Authority (Epra) to punish some rogue dealers suspected to have caused an artificial shortage of petroleum products in the domestic market.

“We have reviewed your recommendations and wish to inform you that this ministry has no objection to the proposed measures. Please, expedite,” the ministry said in a letter seen by the Nation.

Epra Director-General Daniel Kiptoo, in a letter to Petroleum Principal Secretary Andrew Kamau, said the regulator had identified firms that had resorted to exporting fuel at the expense of local consumers.

“Epra has analysed the daily petroleum loadings over the past four weeks and noted that a number of oil marketing companies (OMCs) have in the period under review given priority to export loadings, while the local market was left to suffer intermittent supply,” Mr Kiptoo said in the letter, which was dated April 12 and copied to Energy Cabinet Secretary Monica Juma.

“Epra hereby recommends that in the allocation of capacity for the next three import cycles, key consideration should be given to reduction of capacity share for all OMCs who increased their transit volumes over and above their normal quota during the supply crisis period.”

The Ministry of Petroleum approved the request, setting the stage for tough times for the oil companies that have been adversely identified.

The oil industry is cash-intensive with thin margins, meaning the firms rely on selling huge volumes to generate reasonable returns.

Many of them hugely rely on earnings from other services such as running fast-food joints and retail shops, hence reduced cargo quota will hit them hard and is likely to push them into further financial ruin even as they nurse the wounds of government’s delayed subsidy payments.

The state’s move comes even as the oil firms continue holding onto significant stocks of fuel as the shortage continues to spiral ahead of Epra’s monthly review tomorrow.

Data seen by the Nation shows that as of Monday, Vivo, the company that markets Shell-branded fuels, had five million litres of petrol and 7.9 million litres of diesel in Mombasa, in addition to 4.1 million and 6.4 million litres of the two fuels respectively in Nairobi.

Vivo is the largest oil firm in Kenya with a market share of 21.7 per cent as of last December, Epra data show .

Ola Energy Kenya, which has a market share of 6.7 per cent, had 2.3 million litres of petrol and 9.2 million litres of diesel at Kenya Pipeline Corporation depots in Mombasa, and 1.1 million litres and 823,000 litres of the two products respectively in Nairobi.

Meanwhile, TotalEnergies Marketing Kenya and Rubis Energie Kenya hold a combined quantity of 1.5 million litres of petrol and 4.4 million litres of diesel at the Nairobi Joint Depot (NJD).

The two are the second and third largest players, respectively, in the fuel retail industry in Kenya.

The Nation reported yesterday that some oil marketers were under scrutiny by the state following the prolonged widespread shortage of petroleum products at their outlets across the country, despite the availability of stocks at supply depots.

High-ranking government sources said the country’s third largest marketer, Rubis, is among those on their radar for “unreliable supplies”.

‘Queer shortages’

“We’ve surveyed outlets across the country and Rubis stands out as having some queer shortages and rationed sales,” a senior officer said.

The companies were put on the spot for diverting their fuel stocks to export markets for instant cash. Selling locally means waiting for at least a month before government reimbursement of subsidy funds.

A highly placed source at the Ministry of Petroleum told the Nation the firms are deliberately hoarding the cargo in the hope of selling it at a higher price as they expect Epra to raise the cost of fuels tomorrow to reflect the rapid increase in global crude oil prices, even though they had bought the old stocks cheaply.

“They had blamed the delayed payment of the subsidy for the fuel shortage. But they were paid last week, so why are they not stocking fuel now?” asked the source.