Oil shortage looms over fuel discharge stalemate at jetty

Fred Aminga @Faminga

A fuel shortage looms if an impasse between Kenya Pipeline Company (KPC) and Oryx Energies over delayed discharge of automotive gas oil (AGO) berthed at Kipevu Oil Terminal (KOT) on September  1 is not resolved.

KPC did not allow MT STI Lauren to deliver fuel aboard the vessel forcing the government to order it be discharged at a private storage facility to allow the two sort out the issue.

As KPC plays hard ball, the move could significantly delay the uptake of the product which will be used to inform countrywide monthly fuel prices.

If not resolved, it could set the country back some 85,000 metric tonnes or 102 million litres of automotive gas oil, before the impasse is settled.

KPC warns Oryx that the cargo was jointly sampled by Intertek as a representative surveyor and KPC for pre-discharge testing where test results on the flashpoint (PMCC) was 61 degrees Celsius against the Transport and Storage Agreement (TSA) specifications of 66 degrees Celsius.

“The product is therefore rejected and will not be received into KPC,” said KPC managing director Macharia Irungu in a letter to Oryx Energie managing director Christine Callege.

As the office of the Director of Criminal Investigation moves in, the parent ministry directed the vessel to discharge content into a private storage facility called VTTI Kenya which is accessible by road and sea. The facility is fully owned by Dutch organisation VTTI.

“We have been reliably informed that they have in stock, product with a higher flash point top be blended to meet the KPC operational requirements,” said Petroleum Principal secretary Andrew Kamau in a letter signed on his behalf and copied to the Cabinet Secretary.

“The objective of this is to avoid any shortages on the grade (AGO),” he said.

The PS said will ensure that the same cost at Kipevu Oil Storage Facility (KOSF) applies in handling of this product by ensuring that Kenya Revenue Authority (KRA) moves the product from VTTI terminal to the mainland without the mandatory requirement for generation of entries as is the case for KOSF.

But questions linger how this will pan out, and how it will impact the supply chain with analysts and those privy to the matter saying a similar case lodged in a court in London could come a cropper.

“If they allow the content to get into Kenya, it might set a precedence for a court case in London. This will be a tough call for KPC,” said a dealer who asked not to be named. 

The stakeholders further argue that since KPC has categorically refused to accept the fuel, whatever happens, companies will be forced to use trucks which to evacuate the fuel through roads from the private terminal.

“This will definitely make the process more expensive and dangerous compared to the KPC pipelines,” he said.

In a letter sent to the Ministry of Petroleum and Mining, Oryx Energies terms the move by KPC unfortunate and against measures to ensure the security of oil product supply in the country.

“Quality of the products here-under shall be as per the prevailing specifications published by the KEBS and the OTS agreement.

In the event that the quality of the product delivered does not meet the operational; specifications of the receiving terminals in line with the prevailing contract, the facility operator shall authorise the receipt of such product into its shore tanks, in consultation with MOE&P (Now MOPM), in consultation with MOE&P (Now MOPM).