The USD60 (Sh6,000) tariff per 1,000 litres of transported fuel through the Kenyan oil pipeline is costing the country revenue as landlocked countries turn to Tanzania’s central corridor.
The value of Kenyan petroleum exports has dropped by 43 percent from Sh2.1 billion in the first six months of 2018 to Sh1.2 billion in the first half of 2019.
Balance of payment data by the Kenya National Bureau of Statistics shows the exports are also lower than the Sh2.4 billion export for petroleum products in 2017.
Oil marketers say they pay on average of USD80 (Sh8,000) to ferry oil from Dar es Salaam using trucks but pay USD60 (Sh6,000) tariff when using the pipeline to Kisumu and a further USD35 (Sh3,500) on trucks to buying countries.
Tanzania has also upped its game by increasing efficiency at the port.
“We have been telling the government that USD60 tariff is too high. Sometime for marketers it even makes more sense to send trucks to Mombasa, which we do, and save around USD20 (Sh2,000) because for us, margins make a lot of sense,” an oil marketer who did not wish to be named said.
Kenya Pipeline Company (KPC) Chairman John Ngumi said the tariff is under review by Energy and Petroleum Regulatory Authority (EPRA).
“They are aware we are in the process of a review and if it is an issue, it will be reduced. If there are other issue of efficiencies, we will also look into that,” Mr Ngumi said.
In 2017, KPC gave a 30 percent promotional discount that cut the rates to USD41 (Sh4,100) but Mr Ngumi said this did not drive up volumes as expected.
“The promotional tariff was given to increase traffic but that did not happen. We also had challenges since Line 5 was not ready and now it is ready, and we are able to accommodate incremental throughput,” he said.
For a long time, the Northern Corridor through Mombasa has been the preferred route for Uganda, Rwanda, DR Congo and South Sudan due to port efficiencies and a pipeline to Eldoret and Kisumu from where the petroleum products are trucked to the landlocked countries.
The port of Dar es Salaam has now improved with goods being loaded directly to private terminals where marketers truck to transporters.
George Wachira, the director of Petroleum Focus Consultants, said there has been concerns over the past few months that Uganda is considering to use the Dar es Salaam port instead of Mombasa.
He said such shifts are usually driven by prices.
“The two keep on changing as prices at Mombasa and Dar es Salaam change,” he said.
Oil passes through Kenya either on transit for foreign financed product or as exports where Kenyan companies finance the product.
There has been concerns that Kenyan fuel is adulterated, prompting EPRA to conduct sting operations in 955 petroleum sites between July and September.
But since the government introduced the anti-adulteration levy and pumped up the prices for kerosene, rogue players lack incentives to mix fuel products.
“All sample sites were found to be compliant. These results are a significant milestone in the fight against adulteration and dumping in Kenya,” EPRA said.
KPC relies on tariffs to raise money to service massive debts procured to finance infrastructure investments, including the new Mombasa-Nairobi pipeline built at a cost of USD473.4 million (Sh473 billion), and the four new oil storage tanks in Nairobi that cost USD50 million (Sh50 billion).
The company has also invested USD16 million (Sh16 billion) in the Kisumu Oil Jetty, which currently lies idle due to delays by Uganda in completing its own jetty to receive, provide storage and ease the transportation of oil between the two countries.