Puzzle of Kenya Pipeline's Sh1.3bn annual payment to defunct Kenya Petroleum Refineries

Kenya Pipeline Company depot

A Kenya Pipeline Company depot in Nairobi. 

Photo credit: File | Nation Media Group

The Auditor-General has raised the alarm over the possible loss of Sh1.3 billion annually by Kenya Pipeline Company (KPC) through payments to the moribund Kenya Petroleum Refineries Limited (KPRL) .

In the fiscal year 2021/2022 review, the auditor questioned KPC’s payments to the company, which ceased operations about 10 years ago.

During a Public Investments Committee on Commercial Affairs & Energy meeting chaired by David Pkosing, the MPs directed the Energy and Petroleum Cabinet secretary to dissolve KPRL before the end of this year to stop loss of public funds.

“The payment of the Sh1.3 billion annually for the use of its storage facilities is unnecessary ... We urge the minister in charge to expedite the dissolution of KPRL and its Mombasa oil storage tanks and employees be handed over to KPC,” said Mr Pkosing.

KPC has been seeking to take over 45 storage tanks with a capacity of 484 million litres belonging to KPRL at Changamwe for storage of oil products.

Speaking on the sidelines of a sitting by the committee in Mombasa, Mr Pkosing said once KPRL is fully dissolved, the money can be channelled towards subsidising fuel prices.

The auditor also questioned the criteria KPC was using to grant waivers to some oil marketing companies and not others without a policy. To remedy this, the committee directed KPC to work with various stakeholders to formulate a policy to guide the waivers to stop corruption or discrimination.

During the year under review, the company had hired 21 workers as opposed to six advertised, raising questions.

KPC Managing Director Joe Sang had a difficult time answering this and other queries.

“I’ll take up the case but most of the queries being raised happened in the previous administration but I will work to resolve them” he said.

The Auditor-General’s report on Kenya Pipeline for the year to June 30, 2022 shows expenditures of Sh13,791,313,695 as direct costs, including Sh2,530,110,019 for pipeline maintenance.

Included in the costs are lease payments to KPRL of Sh1,308,851,308 for use of a pipeline network, storage tanks and associated infrastructure.