After failures to have National Oil Corporation of Kenya (NOCK) import 30 per cent petroleum products into the country as previously envisaged, the government now wants to split the cash-strapped parastatal into three subsidiaries.

The split involves elevating NOCK’s current critical roles to form NOC Upstream Limited, NOC Downstream Limited, and NOC Trading Limited, all of which are likely to demand fresh budget from the National Treasury.

Under the new proposals, NOC Upstream Ltd will cover upstream oil and gas exploration. NOC Downstream Ltd to handle marketing and distribution roles while NOC Trading will hold strategic stocks of petroleum products for import and export.

The development is expected to lift NOCK from losses which hit Sh2.2 billion for the full financial year ending June 2023 despite government dangling more capital-intensive programmes for a corporation that has severally failed in implementation.

“Under the proposed turnaround strategy, NOCK will benefit from a partnership that restructures it into three subsidiaries segmented around the petroleum products value-chain,” the Cabinet said in a memo which also disclosed the approval of the revival plans for State-owned Sugar firms.

Before the new development, NOCK had already started the process of leasing some of its petrol stations in an agreement which will allow it to retain the brand but sharing generated profits with private players in the deal. NOCK commands only a 1.05 per cent market share of the petroleum retail outlets.

While it is clear NOCK is teetering on the edge of bankruptcy, concerns abound about whether going forward the three subsidiaries will deliver the core mandate.

The debts, owed to various suppliers and banks such as Stanbic Bank and KCB Group, had incurred Sh1.5 billion in financing costs arising from loan interest and default penalties alone by June.

The losses are linked to the hefty debts, pending bills, and mismanagement that have forced the oil marketer to depend on State bailout to remain afloat.

Incorporated in 1981 with a core mandate of stabilising oil prices, NOCK is involved in marketing the products (downstream), exploration (upstream activities), and development of petroleum infrastructure (midstream). NOCK was among the corporation within the Ministry of Energy and Petroleum that faced budget cuts in the mini-budget effected early this year.

“There is a need for the State Department (Petroleum) to put in place a sound, robust and comprehensive turnaround strategy for NOCK owing to the strategic importance of the State corporation,” Mwala MP Vincent Musyoka who chairs the Energy Committee told Budget and Appropriation Committee last February.

However, coming into operation of the new NOC Upstream Ltd will now force the regime to continue bailing out the entities to meet the 20 per cent of all costs in the exploration excises in the Lokichar oilfields.

The 20 per cent financing requirement is due to the government’s 20 per cent back-in stake in the Lokichar project where the main partner and financier, Tullow Oil, is also seeking to relinquish some stake over liquidity strains.

While competitors in the private sector have always raked in billions in profit, NOCK has always been dogged with mismanagement, theft, and kickbacks over the years while failing to deliver on previous projects. The first gas distribution in 2018, for instance, suffered challenges under NOCK with some suppliers offering faulty cylinders, which cost over Sh200 million in the procurement process.

Last June, the corporation was stripped of the role of directly delivering subsidised gas cylinders to end users in the second attempt by the government to revive the multi-billion project which, again, never materialised.