Spat between State and oil firms over arrears causes fuel shortage

 

Boda boda riders and motorists line up to fuel at Shell Petrol Station in Kisii town yesterday. There is a fuel shortage across the country. [Sammy Omingo, Standard]

The money owed to oil marketing companies by the government for stabilising pump prices over the last few months has denied the companies money to import petroleum products. This could be fuelling the current wave of petroleum products shortage, according to industry players.

Oil industry players say they are owed Sh32 billion although the Petroleum Ministry termed the claim untrue and said it owes them Sh13 billion, which is pending verification.

The oil companies say the high debt level has seen them lack working capital to import adequate fuel stocks, which is threatening to plunge the country into a crisis. Large oil marketing firms are reportedly importing just enough stocks to run for a few days.

In turn, they are not selling fuel to small oil marketing companies. The small marketers – also referred to as independents – lack the ability to import and instead buy fuel from the major oil marketing companies (OMCs) at wholesale level for retailing at their stations.

This has led to stockouts in many parts of the country, especially in North Rift and western Kenya.

The situation appears to be worsening with Nairobi residents reporting instances of petrol stations limiting the amount of fuel they can consume to Sh2,000 per vehicle. In other instances, retail outlets branded by major oil marketing companies also saw a reduction in the amount of fuel they are supplied by the OMCs. In one case, a franchise owner told The Standard that their weekly supply had been reduced to 80,000 litres from an earlier 100,000 litres.

Joseph Karanja, the chairman Kenya Independent Petroleum Distributors Association (Kipeda), said if the situation is not addressed, it could get worse in the coming days and weeks.

“The whole of this week, there have been no supplies. The limited amount of fuel that may have been there is now drying up… OMCs have supplied to their branded outlets but they do not have enough,” said Karanja.

“We have tried talking to the suppliers (major OMCs) and they are pointing at the fuel stabilisation programme. The government has not been paying and this has denied them capital to import products. The little funds that they have are used on importing for their branded outlets.”

Supply hiccups

He added that while it is just now that there is noise about the supply hiccups, it has been in the making for about a month.

Karanja noted that other than motorists who could find themselves stranded due to shortages, industries too are getting stuck. These include infrastructure projects such as roads, particularly in the North Rift, as well as companies that rely on diesel to produce and get products to the market.

“The problem has persisted for a while now, possibly close to a month. For us independents, we stopped working a long time ago because we cannot access petroleum products,” he said.

“It is not just North Rift and western Kenya that are affected but if you go to Mount Kenya region, there are many outlets especially that do not have products.”

Sources also claimed the oil majors have been arm-twisting the government to make good payments for the fuel subsidy.

A senior official with one of the major oil marketers said the industry has been pushing for the payment of money owed by government under the fuel stabilisation programme.

The government started stabilising fuel prices in April last year, whereby it would slash margins for oil marketers, keeping pump prices at the same level and later compensate the oil marketers.

The state has been using money from the Petroleum Development Levy Fund, which is funded by motorists who pay Sh5.40 per litre of petrol and diesel they consume.

Currently, motorists in Nairobi are paying Sh134.7 for a litre of super petrol, which is Sh20 cheaper than the Sh155.11 they should be paying, according to tabulations by the Energy and Petroleum Regulatory Authority (Epra).

Diesel is Sh27.56 cheaper at Sh115.6 per litre while kerosene is Sh26.90 cheaper at Sh103.54 per litre.

In a statement early in the week, the Energy and Petroleum Regulatory Authority (Epra), attributed the stock outs to “unprecedented logistical challenges”.

“These challenges have caused independent petroleum dealers to run out of petroleum stocks,” said Epra, adding that it is working together with the Petroleum ministry and oil marketers to resolve the supply hitches.

The regulator added that there are adequate fuel stocks.

Karanja of Kipeda is however sceptical about Epra’s reassurances, noting that the industry would have since Monday, when Epra issued the statement, seen fuel supply normalise. He expects the situation to get worse.