Fresh details as police hunt for Triton boss

By Standard Team

Police have launched a manhunt for Triton Oil Company boss in connection with the Sh7.6 billion scandal on the day President Kibaki summoned the Energy minister to discuss the issue.

Also being sought is a Kenya Pipeline Company (KPC) manager who ordered last year’s stoppage of fuel pumping for stocktaking in December.

As the saga continues to unfold, The Standard has established that KPC is currently holding 76 million litres it says belong to the National Oil Company, but our investigations indicate the consignment belongs to a foreign company.

It is unclear how such a large quantity ended up in its custody as the company has no known operations locally.

Meanwhile, two oil ships have been queuing at the Mombasa port for the last few weeks because they cannot discharge the cargo, ostensibly because the Kipevu facility could not accommodate new stock.

Kenya Pipeline Company’s headquarters at Kenpipe Plaza, Nairobi. [PHOTO: FILE/STANDARD]

Energy Minister Kiraitu Murungi confirmed yesterday that Interpol has been detailed to help the Kenya Police in hunting for Triton chief Yagnesh Devani and KPC Operations Manager Peter Mecha.

A source at the Immigration Department confirmed that Mr Devani had travelled to India on December 28 last year before the scandal became public.

Scandal continues

Kenya Anti-Corruption Commission (KACC) investigators were at KPC headquarters at Kenpipe Plaza, Nairobi, conducting investigations.

And as the scandal continues to unfold, it has emerged that one of Triton’s financier, Glencore Energy UK, that risks losing Sh2.2 billion, may have some local partnership.

Kiraitu said he expected a brief from the investigators this morning.

Mr Mecha was suspended on January 2 on half pay by then KPC Managing Director George Okungu when the illegal release of oil products to Triton became public.

Mr Okungu has since been sacked after he admitted he was not aware of the scandal in which taxpayers could lose Sh7.6 billion.

Yesterday, Kiraitu said there would be no "sacred cows" and anyone implicated, no matter their positions in Government, would not be spared.

"We are not going to protect anyone or hide anything. We want thorough investigations conducted and those culpable to face the law,’’ said Kiraitu.

But even as the search for Devani intensified, his arrest may not be of much help as documents in our possession indicate that Triton did not acknowledge receipt of the 126 million litres of oil products delivered to it.

The implication is that KPC has no evidence that the oil in question was delivered to Triton, even though third parties have acknowledged receipt of oil from the company.

No Records

"Furthermore, there is no record to show that Triton acknowledged receipt of the products released to them without authority from the financiers. The statements sent to the financiers were also erroneous,’’ says a letter by Okungu wrote when he suspended Mecha.

Kenya Commercial Bank (KCB) now stands to lose Sh1.8 billion following KPC’s decision to release 30 million litres of oil to Triton now in receivership.

Other financiers exerting pressure on KPC are Glencore of UK, which risks losing Sh2.2 billion, Fortis of France (Sh906 million) and Emirates National Oil Company (Sh2.5b).

The conspiracy by KPC, Triton and Ministry of Energy top officials is elaborate.

Extensive investigation by The Standard reveals that KPC ignored professional advice from a leading audit firm and continued to allow Triton to hold products for speculative purposes in its pursuit of super profits.

The revelations come even as Government feigns ignorance of the goings-on at KPC although it was supplied with numerous reports and oil marketers have been complaining of the unfair ullage (storage capacity) allocation.

Energy Permanent Secretary Patrick Nyoike yesterday distanced himself from the scandal.

"I can assure you I have never ever been involved in KPC operations. If I’m implicated, I will step down and I’m prepared to face the law," Mr Nyoike said.

But even as the PS was defending himself, the scam consumed its latest victim in Mr George Wachira, the Petroleum Institute of East Africa general manager and KPC board member, who resigned yesterday.

It also emerged that three small banks and individual investors have lost Sh1 billion in short term notes (STNs) floated by Triton.

Elaborate conspiracy

The STNs prepared and marketed by Dry and Associates saw Equitorial Commercial Bank invest Sh200 million, Orient Bank Sh150 million and new entrant EcoBank Sh150 million. The STNs are not vetted by the Capital Markets Authority and are thus not guaranteed.

Despite the revelations, the Central Bank says the scandal will not cause instability in banking.

"The amount is not considered material to cause instability in any of the individual banks, or to the banking sector," said Governor Njuguna Ndung’u.

According to audit reports in our possession, KPC has continuously allocated Triton an average of 40 per cent ullage at its Kipevu Oil Storage facility (KOSF) for the past three years contrary to its own regulations of 45 days maximum.

Price volatility

In January 2006, for example, Triton was holding the largest amount of 87,000 cubic metres, accounting for 49.22 per cent of stock at KOSF.

The facility has a capacity of 280,000 cubic metres in its nine tanks. Of this, working ullage is only 210,000 cubic metres — which is the volume that can be evacuated in any month due to the Pipeline’s capacity constraints.

Price volatility in the oil industry has enabled Triton to buy crude oil at cheaper prices and hold it until prices soar locally. While the machinations have worked, culminating in the company and co-conspirators making a kill when crude oil prices in the international market reached a historical high of $148 a barrel in June, the money minting scheme came tumbling down when prices plummeted to below $50 a barrel in November.

The drastic fall meant that Triton, which had products at KOSF and had imported another consignment of 56,000 metric tons in October last year, could not sell the product at a price that could make it recover import costs.

In effect, the company was unable to honour financial obligations to financers like KCB. This forced KCB to attach its assets.

But in desperate efforts to cover up the scam, KPC mysteriously released 126 million litres to the company that were to be sold to settle debts owed to banks and ensure the company remains afloat. Triton was only entitled to 2.2 million litres.

Unfortunately, a spirited demand by Kenyans that oil marketers reduce pump prices in line with falling international prices meant that Triton could only sell the product at a loss.

Reporting by John Njiraini, Joseph Murimi and James Anyanzwa