How the deception game was hatched

• In seeking the perpetrators of the scam, the dragnet will have to be cast wide

The scale of the complex game of deception in the oil industry is still not clear.

Indeed the information the Kenya Pipeline Company (KPC) and the Ministry of Energy have provided is from an internal audit covering the period between November 2007 and December last year.

Chances are that the amount of money lost in the current deal involving Triton oil company will be much higher when the audit is stretched to July 2004 when the firm (Triton) signed the so-called collateral financing agreement with KPC.

It is also noteworthy that the figure reported by KPC was calculated at the conservative price of Sh60 a litre. The total amount of oil clandestinely siphoned off the KPC systems was 126.4 million litres.

But by the time these transactions were being done, average prices were in the range of Sh100 a litre. If you calculate at the price of Sh100 a litre, you realise that the fund at risk runs into hundreds of billions.

Didn’t cover

Furthermore, the internal audit by KPC did not cover what Triton owes other oil companies in respect of what is known as the Open Tender System.

If the proprietor of Triton Petroleum Company, Mr Yagesh Devani, runs to seek refuge in a country with which Kenya has no extradition treaty as is widely rumoured, many small oil companies may be forced into bankruptcy.

How he managed to breach what is regarded as a watertight system is perhaps the most intriguing aspect of the saga.

The starting point for the investigators will be the Operations Department, especially the people involved in the actual release of the product from the Kenya Pipeline system, the people referred to in Kenya Pipeline’s lingo as “schedules”.

Who instructed them to release the oil to Mr Devani? The dragnet will have to be cast wide enough to include commercial banks and to determine whether KPC staff were colluding with other oil marketing companies.

How the financiers agreed to hold so much oil within the Kenya Pipeline system for such long periods without detecting that something wrong was going on is yet another puzzle.

According to KPC’s internal audit report, the unauthorised release of cargo by Mr Devani went on for close to nine months without being noticed. Or were they colluding with Triton to hoard ullage at the expense of other players?

To understand how the game of deception was perpetrated, one has to understand how KPC’s collateral finance agreements work.

Briefly, this is how it works. When you bring your oil into the country, you must sign an agreement with KPC. This agreement states that oil within the KPC system can only be released with the authority and instructions of the financiers of that consignment.