Intrigues delay KPC fuel theft audit findings

Sunday July 07 2019

KPC acting managing director Hudson Andambi. FILE PHOTO | NMG

Uncertainty continues to cloud the results of a forensic audit on the fuel storage facilities at Kenya Pipeline Company, which oil marketers commissioned following allegations of theft from the storage tanks and pipelines.

The audit, which was demanded by the marketers supply co-ordination secretariat, Supplycor Kenya Limited, was meant to last seven weeks from February, but has since gone beyond four months, with no sign of any results yet.

Oil industry players who did not want to be quoted for fear of reprisal by the major dealers, told the Sunday Nation that the oil marketing companies have refused to accept the results of the audit, which indicate the loss is far less than they had estimated.

The marketers had contracted London-based Channoil Consulting Limited at Sh39 million to carry out the stock management audit at KPC.

They are also said to be keen on justifying the huge losses which created an uproar and contributed to suspension of top officials at KPC, including then managing director Joe Sang.

“There is a strong disagreement on the results of the audit since we have had figures of losses floated before and some have even been paid out. So some people want the numbers adjusted to fit the earlier narrative or even make it higher. But the UK firm has refused to play ball. That is why we have to wait longer, otherwise the audit ended a long time ago,” the source said.


The three-year stock audit, which was meant to start in December 2018, was postponed twice to later February.


The Supplycor chairman, who is also Kennol Kobil’s managing director, Mr Martin Kimani, dismissed the claims of a disagreement with the audit, saying the process had reached advanced stages with only some operational meetings going on to finalise the report.

Mr Kimani said he would be meeting the consultants to discuss the results.

Asked why the audit had taken so long, he said: “We had planned that it would take seven weeks but that was before it started. Maybe we underestimated the time we needed to complete it. We are engaging in various operational dialogues but there is no disagreement. Product loss is exactly why we asked for an audit because we cannot just sit there and wait.”

The oil marketers bear the cost of the audit, which they called for amid allegations that there had been losses amounting to about Sh1.2 billion.

The Energy and Petroleum Regulatory Authority factors in such losses in the monthly compilation of petroleum products pump prices under a Transport and Services Agreement with KPC that allows for losses of up to 0.25 per cent of the product in the pipeline.

If the oil marketers’ claims turn out to be higher than the actual loss, a new dilemma on how to recover the money already loaded onto consumers may prove too complex.

It is this dilemma that could be driving the companies to have an audit that justifies the losses.

The TSA, which defines the losses as “including, but not limited to, mal-operation of the pipelines, terminals or appurtenant facilities, including pump stations, pipeline breaks, leaks and pilfering,” provides a comfortable cover that has seen little concern when they occur, with the guarantee that OMCs will be compensated.

Immediately after the audit commenced, the oil marketers made another claim — 51 million litres of jet fuel, whose retail market worth stands at around Sh5 billion, had gone missing from the stocks.

This triggered a crisis at Moi and Jomo Kenyatta International airports, forcing the Kenya Airports Authority to issue a NOTAM — a written notification issued to pilots before a flight — asking them to refuel at other locations until the crisis is over.

KPC acting managing director Hudson Andambi said the State agency is still waiting for the results.

Last year, a KPC brief to the board dragged in some oil dealers into the oil theft syndicate, with most of them said to have ignored demand letters from the company for close to two years over “irregular advances by an employee”.