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Tuesday, May 03, 2011

Petrol Shortages in Kenya - May 2011

Ahhh... The stink of scandal again!

Why the shortage of petrol during the long weekend?
[Like many complex issues, these are multiple factors at play. I try to keep it simple]

Quick primer:
KPRL - Kenya Petroleum Refineries Ltd. 50% Essar 50% Government of Kenya [GoK]
ERC - Energy Regulatory Commission
MoE - Minister of Energy with kiraitu as minister & nyoika as PS
OMC - Oil Marketing Company e.g. NOCK, Total, Hashi, KenolKobil, etc
NOCK - National Oil Co of Kenya 100% GoK owned
KPC - Kenya Pipeline Company [100% GoK owned. Corrupt & Inept]
KOSF - Kenya Oil Storage Facilities in charge of storage. Linked to KPRL, KPA & KPC
KPA - Kenya Ports Authority

1) KPRL - A recap. By law, all OMCs must process 70% of the fuel imports at KPRL. In practice it is 50% since Kenya's consumption has risen. What it means is that OMCs import crude representing 50% of the fuel they sell.

KPRL [inefficient under the best of circumstances] has been out of action for most of April for some reason or the other. This means the crude to be converted to White Oils remains unrefined which means PMS [Premium Petrol] & RMS [Regular Petrol] shortages have begun to bite.

Of course, in typical Kenyan fashion, the 'powers that be' doesn't tell the consumers or OMCs the full story. Emergency stocks ordered but seems one OMC was favored with 'inside' info. Also there is a ship waiting to discharge but see (2)...

The PS's assertion was confirmed by the Kenya Pipeline Company which said there were enough stocks in the country.

He went on to explain that storage facilities in Mombasa were full and a vessel that was discharging super petrol on Thursday was forced to leave the berth after offloading only 30 metric tonnes as the tanks could not take any more products.

Where is MoE 'powers that be' in all this? Part of the problem, me thinks!

2) KPC & KOSF is at it again. The corrupt &/or inept folks at MoE know of the 'full' tanks due to imports & storage by a 'briefcase' dealer but they will do nothing since it is 'connected'.

Ullage is to be allocated by market share but this briefcase OMC has hogged the storage at KPC/KOSF thus other importers are stuck with petrol on the ship!

3) "Hoarding" allegations by OMCs.
Some uninformed folks find it easy to blame OMCs for hoarding when prices are FALLING. Seriously? Economics 101?

GoK through ERC is set to announce reduction in taxes on fuel. Taxes are paid to KRA/GoK at the point of loading i.e. when the OMC takes it from KPC. The next price 'change' announcement is on 14 May 2011. Therefore, there is no price increase expected until then except for tax reduction. [This can be a much longer/detailed discussion but suffice to say you don't hoard when prices are falling].

4) KPA seems innocent this time around! They cannot do much if the KPC/KOSF tanks are full. In the meantime the demurrage charges add up. Fast.

I have to admit the ERC is slowly showing some spine rather than drinking the Kool Aid dished out by MoE.
Director General Eng Kaburu Mwirichia was however careful not to jump into conclusions adding that accusations of hoarding by the oil marketers hurt them more than they hurt consumers.

10 comments:

mo'z dimension said...

KPRL is out of action because?! Mechanical breakdown what? Assume the people reading this are 'wananchi' break down what the acronyms are KOSF,KPRL. Assume reader doesn't know. I'd like to share it on my fb. Good piece

Wangui said...

@coldtusker made you a promise that I would read this. Please educate on how the oil process works so that we the lay reader get's like @Mo'z Dimension suggests loving it!

bankelele said...

NTV last night showed Oilcomm and NOCK had the highest stocks at KPC (~600k) followed by Kenol and Total (~500k)

coldtusker said...

mo'z - Asante. I hope the lexicon helps! I put the info up after seeing your comment.

@wangui - I have earlier posts describing the process. Please search on the blog. If you cant find them let me know.

@bankelele - I would love to see the original long-form reports from Friday to Wednesday! Kenol & Total have 20%+ each of the market which means they should have at least 40% of ullage!

startupkenya said...

This is a great post that tries to identify the origin of the fuel shortage crisis. However, it also begs more questions, like:

1. Why has the unnamed OMC hogged ullage at KOSF, how is it benefiting at this point?
2. What inside info is this that the OMC benefitted from, (3) and how did they benefit?
4. Where is NOCK in all of this, don't they exist to prevent exactly against this kind of scenario?
5. Why is the shortage only in Nairobi, I know for a fact rift valley has no problems.
6. How has ERC shown some spine, what have they done?
7. So we can blame KPRL then?
8. Isn't diesel and kerosene also refined from crude, how come there is no shortage of these fuels?
9.and most importantly... WHO exactly is benefiting the most from this... since this is the person we can most likely blame.
3.

mmnjug said...

Besides the obvious politics and ccorruption, what would be the effects of sidestepping KPRL until it can be upgraded and attract business itself from OMCs and also change the importation system by letting the OMCs import whatever they need whenever they need without consulting the GoK nor MoE? Talk of throwing a spanner into the current works.....

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