Kibaki crisis talks fail to end petrol shortage

• Kibaki summons Kiraitu and Uhuru and orders them to fix the fuel crisis as motorists continue to spend hours lining up for petrol and oil firms are accused of playing games

The shortage of petrol entered the fourth day on Thursday, even as President Mwai Kibaki rallied ministers to assure the public that matters were under control.

Motorists queued at petrol stations, blocking roads and creating long jams on the roads. Petrol station owners rationed fuel, in many places selling no more than Sh500 worth of fuel to any one motorist.

Energy minister Kiraitu Murungi conceded that the energy sector is in a mess and proposed a stakeholders’ meeting to decide the way forward.

But the fuel shortage crisis exposed how Soviet era over-regulation by the government on the one hand, and aggressive profiteering by oil companies on the other, have created a vulnerable supply chain.

The result is a system which is incapable of responding quickly even in crippling shortages such as the one being experienced now.

Since October last year, the ministry of Energy introduced regulations prohibiting imports of oil outside the ministry of energy-coordinated Open Tender Supply system (OTS).

Under this system, all oil imported into the country, including fuel headed for neighbouring Uganda and Rwanda, must come into the country by one ship, imported by one player and shared by the rest according to market share.

With private imports by individual marketers restricted, all players must patiently wait to get supplies from the next OTS tender, even when their customers want more.

The only exception are the rare cases where politically-favoured  importers are allowed to bring in product from outside the system.

Access to the only pipeline is regulated by an ullage committee under the oversight of the ministry of Energy.

In Nairobi, truck loading facilities are only available to five players, implying that fast movement of products from Kenya Pipeline Corporation’s systems to petrol stations by using trucks is difficult even during emergency situations such as Nairobi is experiencing at the moment.

And, all oil marketers must, by law, support the Kenya Petroleum Refineries by importing a volume of crude, depending on individual market share. In total, the refinery is guaranteed a total of 1.6 million tonnes of crude a year.

It is partly because of these in-built rigidities that oil companies are unable to increase supply, even though there is fuel in the country.

Oil companies are required to pay taxes before they are allowed to remove their fuel from KPC depots, which is also contributing to the delays.

Then are the cases where millions of litres of fuel is held at KPC depots in Nairobi because the importers have not paid their financiers as required under the so- called collateral financing arrangements.

On Thursday, energy minister Kiraitu Murungi  admitted that a one-week shut down of the refinery had delayed delivery of 8 million of litres into KPC’s system.

He also disclosed that KenolKobil had not delivered 7 million litres of petrol it was supposed to bring in under the OTS system  for the month of March.

The OTS import for the month of April by Gulf Petroleum amounting to 29 million litres of petrol had also been delayed for five days.