Fury over KPC plan to bill marketers Sh1bn for losses

The Kenya Pipeline Company (KPC) is on the spot again over its intention to charge oil marketers Sh1 billion for fuel it claims was lost through vandalism and spillages in its network.

Although the losses are covered by CIC Insurance Group, KPC intends to bill the marketers for losses that may not be taken up by the firm.

This has kicked off a storm, coming in the wake of revelations that unscrupulous insiders could be using system losses as a camouflage to siphon fuel from the line for resale in the black market.

This echoes the Triton scandal, where secured oil in storage was evacuated without authority of the marketers.

ACCOUNTABILITY

Correspondence seen by Nation shows that KPC Managing Director Joe Sang wrote to Supplycor Kenya Limited, the association of oil marketers on July 5 giving notice that 11.6 million litres of oil had been lost over the past two years "due to vandalism and accidental spillages of the mainline from Mombasa to Nairobi (Line 1)".

“The company expects the above losses to be compensated by insurance to the fullest extent possible, and any balances not remedied shall be recovered from the industry as per clause 4.5 of the total TSA,” Mr Sang said.

Oil marketers through Supplycor Chairman Joe Muganda responded with surprise last week, saying KPC should be the liability because of its fiduciary role in the sector.

“KPC is a custodian and a transporter of the OMCs stocks, and bears the heavy responsibility and duty of care. We do not believe force majeure can be applied, and this liability is not transferable,” Mr Muganda said.

AUDIT

But at the heart of the dispute appears to be long-term grievances on the stock reports KPC gives marketers for which Supplycor wants the company to institute effective measures to safeguard products.

Mr Muganda said Supplycor would immediately "commission a thorough audit of our stocks by an independent oil industry expert to satisfy ourselves on the stock reports we get from KPC”.

In response, Mr Sang assured marketers that the apportioning of losses would not be done until a loss adjuster files a report to determine to what extent the insurance would compensate.

A meeting between KPC and the insurers is scheduled for tomorrow.

SPILLAGE

According to the Transport and Storage Agreement (TSA) signed with marketers, KPC indemnifies marketers when losses arising from faulty facilities and pilfering exceed 0.25 per cent of products by volume based on a six-month moving average.

The losses are assigned to each marketer based on the proportion of the product in the system on a three-month moving average.

KPC attributes the losses in dispute to spillage in Thange, Makueni, in 2015 and Ngong Forest this year.

In Thange, farmers claimed compensation and so far they have been paid Sh23 million by the insurer.

The Industrial All Risks Cover underwrites the product, repairs and maintenance and third party risks.