Kenya oil industry in chaos as fuel shortage bites

Motorists stood in long queues on Wednesday as one of the most severe and bizarre fuel shortages hit many parts of the country.

Many people ran out of fuel on the road while others were forced to leave their vehicles at home and take public transport. (IN PICTURES: Nairobi fuel crisis)

Petrol stations were forced to close after running out of fuel due to panic purchases.

The absence of petrol at the pump, particularly after the government confirmed that there was 19 million litres in storage tanks in Nairobi, is a commentary on the chaos in fuel distribution.

On Wednesday, the government passed the buck to the oil companies, accusing them of creating a shortage by refusing to order adequate stocks over the Labour Day holiday.

But even as Kenyans grappled with the shortages, the government on Wednesday maintained that there was enough fuel in the country.

Energy Permanent Secretary Patrick Nyoike passed the buck to oil marketers, charging that even though KPC tanks were full, oil companies were not picking up products from the depots.

But the crisis had for the first time exposed the mess and the in- built inefficiencies in the oil supply chain in Kenya.

For instance, it emerged on Wednesday that of the 19 million litres of petrol sitting in KPC tanks as wananchi were suffering, the largest proportion belonged to trading companies with no marketing outlets.

They were Addax Kenya Ltd, Royal Energy Ltd , Gulf Oil and an importer who signed as “one time vendor”.

How these small players came to hold so much petrol within KPC’s systems at a time when the rest of the industry was dry remains a puzzle.

The ministry of Energy co-ordinates the so-called ullage committee that decides how to allocate space in KPC storage facilities to oil companies.

Industry experts said the current mess was a build –up of several problems, including inefficiency at the Kenya Petroleum Oil Refineries (KPRL) and disputes arising from claims of discrimination in the management of the ministry of Energy-supervised Open Tender System.

Oil firms compete to import fuel for the entire country in the tender system.

Last month, a major controversy erupted when companies refused to buy petrol that had been imported on the industry’s behalf by state-owned National Oil Corporation of Kenya, claiming that NOCK had broken rules governing the Open Tender System.

For weeks, petroleum products would not move as the controversy over NOCK’s disputed cargo persisted and as KPC’s facilities got clogged up. (READ: Blame game as crude oil battles intensify)

Then there is the fact that millions of litres of petrol imported into the country by some of the big marketing companies several months ago, are currently sitting in tanks at the refinery.

“We have 32 million litres of  super petrol sitting within the refinery system,” disclosed an official of Shell Kenya Ltd, who asked not to be named because of the tension in the industry.