Petrol Shortages in Kenya - May 2011 Part 3

Now for some Q&As as asked by some folks! Answers in italics.

@Waithaka asked: Kiraitu has to read a rioting act to all Oil Markers to behave or risk loosing their licences.
If he is unable or unwilling, He should be fired. But does Kibaki have the balls to fire his longtime friend?

'True it is,' wrote Charles Dudley Warner in 1850, 'that politics makes strange bedfellows.'

@KW: - Is OTS an effective method of importing oil for the country? From quality, quantity and cost perspective?

This is a complex topic. The arrangement is simple yet complicated.

At the current moment, YES.

- Kenya lacks sufficient capacity to accept multiple smaller shipments vs larger shipments. Other ships do offload at Shimanzi & these are primarily private cargoes.

- OTS allows for bulk buying thus if handled properly, can lead to lower prices

- OTS shipments are bid for competitively but the problem has been the delivery i.e. delayed deliveries or short deliveries.

Long Term: I think a similar arrangement to OTS should be maintained for smaller firms to pool their buying power. The larger firms can import their own cargoes without the need for OTS

Quality: Whether under OTS or otherwise, each shipment should [& is] inspected

Quantity: See above

Cost: See above

- As I understand it, our refinery is propped up by GoK regulations. Does this mean it would be more efficient (and/or cheaper) for each OMC to import it's own refined product? If so, does the benefit of refining a certain quota locally outweigh the negative from a big picture point of view (i.e. for the country).

Yes, it is cheaper to import REFINED products vs using KPRL

- KPRL is ancient & very inefficient

- Imports of refined products allows Kenyan OMCs to import what is NEEDED not what can be produced. KPRL produces multiple fractional distillates. Some products are either not needed or over-supplied in Kenya leading to opportunity losses.

Long-term: If Kenya can secure crude oil supplies from South Sudan then building a new refinery in Kenya makes sense for local consumption & re-exports. Uganda plans to build their own refinery which is a good idea for them & Kenya which can import the refined products.

- Are there any penalties applicable to importers/OMC's who hog storage?
Not as such but there seem to be some new rules being put into place about evacuation from KPC storage tanks.

Technically, the 'hogs' should not have been allowed to pump in the 'extra' fuel into KPC's tanks [allocation of ullage is by an ullage committee but KPC controls the process] but it happened & someone at KPC is at fault.