Kenya Pipeline keeps oil marketers in dark over loss of 23m litres of fuel

Wednesday November 28 2018

 Kenya Pipeline depot

General Service Unit officers cordon off an area where jet fuel spilt near Kenya Pipeline depot on North Airport Road. PHOTO | FILE | NATION MEDIA GROUP 

JOHN KAMAU
By JOHN KAMAU
More by this Author

Oil marketers will have to wait much longer to know how their 23 million litres went missing after Kenya Pipeline Company board failed to marshal a quorum to discuss the matter.

The special board meeting, called by KPC chairman John Ngumi, and which was to discuss the fuel loss scam, flopped after three members gave it a wide berth, albeit with reasons. The three were lawyer Jinaro Kibet, the Treasury representative Eric Korir and businesswoman Felicity Biriri.

Although KPC ought to have a full board of nine members, it is now running with only seven members after the expiry of the term of Maj (rtd) Iltasayon Neepe and Wahome Gitonga.

There was speculation that the meeting would have put the KPC management under Joe Sang on the carpet to explain how fuel worth Sh2.3 billion disappeared under their watch and the way forward after oil marketers demanded to carry out a thorough forensic audit of the product loss within KPC.

CONFRONTATION

Credible sources say there would have been a major confrontation between the management and the board over the missing 23 million litres.

Mr Sang has officially explained that 4.4 million litres were “stolen” in Koru last year after vandals drilled the pipeline and diverted fuel to a nearby petrol station. This, according to KPC, went undetected for four months.

While Mr Sang has also explained that 1.2 million litres spilt within Ngong Forest between April and May this year, the minister for Environment, Mr Keriako Tobiko, has said there was no such spill.

The balance of 4.8 million litres is alleged to have spilt inside Lisa Ranch, owned by Prof Philip Mbithi, a former Head of Civil Service and Secretary to the Cabinet. A spot-check by the Nation found no evidence of a major spill.

More so, a KPC board finance committee paper, which was set to be discussed, indicates that the total loss from spillages and the gain/loss stands at 23 million litres as of September 30.

ROCK BOTTOM

While the Oil Marketing Companies (OMCs) have not gone public on their stand, sources say that the working relationship with KPC hit rock bottom during a meeting at Serena Hotel on August 23, when they rejected KPC’s bid to pass the losses to the customers. This was captured in Minute 4 of the meeting which indicates that “there was no consensus” between OMC’s and KPC on the losses.

The Energy Regulatory Commission, which would have covered up the losses by increasing fuel prices, seems to have abandoned the KPC management. In a letter dated October 24 to Mr Sang, ERC Director-General Robert Oimeke tells KPC to “liaise with OMCs for a forensic audit of the product loss.”

Some 10 OMCs had on October 26 written to KPC, saying they would like to carry out the forensic audit “within the month of December 2018.”

VALIDATE CONTROLS

OMC executives who spoke to the Nation said they were not satisfied with the explanations given by the KPC management. “It is not possible to have a stock loss of 23 million litres,” said an executive.

The OMCs said they want to understand the stock management process and validate all the controls that KPC has put in place around the stock movement from the time the fuel is offloaded from a tanker.

KPC and the OMCs have a Transportation and Storage Agreement (TSA) that indemnifies them of all losses of products in KPC’s custody. As a result, KPC is liable for all losses resulting from leaks, pipeline breaks and pilfering where such losses exceed 0.25 per cent of products “calculated by volume at 20 degrees Celsius within a period of six monthly moving average.”