Oil marketer agrees to pay refinery Sh1.2bn

Oil marketer KenolKobil has agreed to pay the disputed Sh1.2 billion it owes Kenya Petroleum Refineries.

The move could see the troubled oil marketer allowed back to the two oil import avenue, easing its current woes.

The agreement was reached last Friday in a meeting mediated by the Energy Regulatory Commission. The two companies and the officials from the Ministry of Energy and Petroleum were present.
Three instalments

“In a nutshell, we agreed that KenolKobil will pay us (KPRL) the money in three instalments. KPRL is not required to pay anything to KenolKobil,” KPRL managing director Brij Bansal told the Nation in a telephone interview Tuesday.

The Kenya Petroleum Refineries has been demanding Sh1.2 billion from the troubled oil marketer, money it says it owes as a result of default on payment for petroleum products collected from the Mombasa-based refinery.

On its part, KenolKobil had disputed the amount claiming the refinery owes it Sh2.2 billion in product losses incurred due to inefficiencies at the refinery.

The dispute saw the government lock out the oil marketer from both the Open Tender system (OTS), and allocation from the refinery, the two main sources of procuring fuel.

Speaking in a telephone interview on Friday, ERC director-general Kaburu Mwirichia said both parties had made positive moves towards resolving the issue, but declined to delve further into the subject.

“What I can tell you for sure is that today’s meeting made positive progress and the problem is almost resolved,” Mr Mwirichia said.

Energy and Petroleum Cabinet secretary Davis Chirchir said KenolKobil will be reinstated to participate in the OTS once it clears its outstanding debt at KPRL.

“The agreement to pay means that we will consider taking back the company to the OTS once this is done,” he told the Nation in a telephone interview Tuesday.

A schedule of unpaid products from KPRL dated May 19 this year highlighted KenolKobil as the largest defaulter, having not paid for a collective 19,610 tonnes of fuel products out of the total collective 34,462 tonnes of refined products that was unpaid at the time.

Defaulters’ list

The defaulters’ list contained names of 18 oil marketers.

Other companies in the list included Gulf Energy Limited, Total Kenya and the National Oil Corporation of Kenya.

It is important that KenolKobil regains participation in the OTS and allocation of refined products.

This is because both fuel sourcing avenues will give it favourable grounds to turn around its fortunes, now that it is seeking to partner with an external strategic investor to finance its expansion plans.

Last year, the company posted a loss of Sh6 billion after a long period of making profits, on the grounds of “unfavourable” regulatory environment.