How bid to probe oil import deals flopped

Cofek Secretary-General Stephen Mutoro

Cofek Secretary-General Stephen Mutoro with then Energy  Petroleum Regulatory Authority Director-General Pavel Oimeke during an event on December 5, 2019. 

Photo credit: File | Nation Media Group

On May 21, 2022, a group of 17 people from the National Assembly settled into a boardroom at the English Point Marina in Mombasa to start an inquiry into the Open Tender System (OTS) – the procurement process through which petroleum consumed in Kenya is imported.

The team had 11 MPs from the National Assembly’s Departmental Committee on Energy, and six support staff tasked with technical roles ranging from legal to research and analysis.

The Energy committee flew to Mombasa to conduct an inquiry into the OTS following a petition filed by the Consumer Federation of Kenya (Cofek).

Cofek Secretary-General Stephen Mutoro was present to argue that the OTS is an opaque process with no formal rules, a situation that allowed only 13 out of over 100 companies to participate in the tender proceedings.

The respondent was the Ministry of Petroleum and Energy, which is the Energy and Petroleum Regulatory Authority’s parent institution.

The Energy ministry sent a team of five, including Energy and Petroleum Regulatory Authority (Epra) boss Daniel Kiptoo.

Interestingly, among the MPs in the committee was former Epra Director-General Pavel Oimeke.

Mr Oimeke was Epra director-general between 2017 and 2021. He resigned amid a corruption case in which he had been accused of demanding a Sh200,000 bribe to reopen a petrol station in Oyugis, Homa Bay County.

Following his resignation, Mr Oimeke successfully contested for the Bonchari constituency seat that fell vacant after the death of John Oroo Oyioka.

A few minutes after 10am, Ndaragwa MP Jeremiah Kioni, who chairs the committee, opened proceedings with a word of prayer before allowing Mr Mutoro to take the floor.

Mr Mutoro asked that the Competition Authority of Kenya be invited to probe dominance of the OTS by a few companies.

He also blamed the ministry for failing to make public tender proceedings, bid prices and other crucial details that would have the OTS conform to the Public Procurement and Disposal Act.

On May 21, 2022 the Energy ministry had its chance to respond to the allegations.

The ministry revealed the list of OTS winners dating back to November 2020 in a bid to show that the process is open and fair to all participants.

Mr Joseph Wafula, the ministry’s chief petroleum economist, said that currently there are 94 companies eligible to contest for the OTS. The reduction followed default by some companies in paying for fuel from other OTS winners.

Oil marketers usually place orders of how much fuel they will purchase, and are required to pay up by the fifth working day after delivery. Default in timely payment can result in suspension from bidding under the OTS.

Mr Wafula held that the ministry only facilitates the process, and that all participants send officials to append their signatures during the bidding.

The data shows that Swiss firm Oryx Energies had won oil import deals at least 12 times in that period.

Oryx’s closest rival was locally-owned Galana Oil, which bagged at least eight import deals. Six times through Galana Oil, and twice through its sister company Kencor.

The two oil dealers will have imported more petroleum products than the other five OTS winners combined between November 2020 and September 2022.

E3 Energy got at least five contracts in the same period, as Dubai’s Asharami Synergy won four.

The ministry’s data shows that in the same period, Rubis will have won the OTS four times. Thrice under Gulf Energy and once through Rubis.

Gulf Energy and Texas Energy have each imported petroleum at least three times.

Vivo Energy has only imported petroleum twice.

Out of the 108 companies eligible to bid for the tender, only eight companies have succeeded in winning the lucrative import deal that rakes in profits in the billions for winners.

Despite the figures the committee ruled, after a two-day hearing, that there was no evidence to show that there is any collusion or dominance in the OTS.

The MPs in their determination held that not all oil marketing companies have the financial capacity to import such huge volumes of petroleum at a go, hence it would be a stretch to vilify the few companies that participate in the OTS.

The committee, however, asked the ministry to persuade smaller players to group up so as to secure financing for the OTS.

“Further, the Ministry of Petroleum and Energy should through its facilitative role encourage smaller marketers to organise themselves into larger conglomerates of bidders to attract foreign bank funding for the supply process,” the committee said in its report.

Interestingly, the committee found that there are no proper regulations to govern the procurement process.

Recommendations from the committee suggest that the OTS may have been conducted contrary to Kenya’s procurement laws, which require procuring entities to advertise tenders in media platforms with a national outreach and then publish the results in a similar fashion.

“The committee recommends that the Ministry of Petroleum and Epra submits regulations providing for importation of petroleum through open tendering system and the manner in which such system shall operate as envisioned under section 101 (d) of the Petroleum Act no. 2 of 2019 to Parliament by December 31, 2022.”

“The regulations should provide that the ministry and Epra shall maintain an online portal that is accessible to the public where they shall advertise and publish all information relating to bids and awards on the open tendering system… The ministry and Epra publishes details of bids including participating bidders, winners and their price quotations in its website, commencing 90 days after tabling of this report in the National Assembly,” the report reads.

This means that by September, when the next round of OTS will be taking place, the ministry and Epra will be required to give details of the companies contesting, their beneficial owners and their bids.