Rising crude oil prices push Kenol back to profitability

High and stable global crude oil prices in the first half of the year pushed listed oil marketer Kenol/Kobil back to profitability, delivering Sh1.17 billion in after-tax profit compared to a Sh431 million loss in the same period last year.

A sharp drop in oil prices last year from the 2008 high levels left the company with expensive stocks which it had to sell at lower local pump prices, eating into the profit margins.

But group managing director Jacob Segman said stability of oil prices in the first six months of 2010 meant a better trading period for the oil marketer.

“The first half of 2009 will be remembered as the most difficult period for the oil industry in the recent past due to the sharp drop in oil prices. But the group has been able to turn around this situation, ”said Mr Segman

World oil prices ranged between an average of $77 in January, 2010 and $75 last month.

In 2008, however, crude oil prices peaked at $146 a barrel before coming down to a low of $45 at the beginning of last year, leaving oil marketers with costly stocks.

Pump prices averaged Sh75 per litre of petrol in January, 2009. before rising to around Sh84 last month.

In 2008, pump prices hit a high of Sh110.

The improved performance comes when Kenol/Kobil, which supplies more than a quarter of the Kenyan market is set to establish operations in Mozambique as it seeks to secure regional markets with major port facilities.

The firm’s bid for a piece of the Southern Africa market collapsed early this year after the Zimbabwean government blocked its plan to acquire the assets of Shell and BP operations in that country.

It has been aiming at boosting its market share.

Data from industry lobby—the Petroleum Institute of East Africa (PIEA)—places Kenol’s market share at 18.7, down from 23.6 per cent last year

The firm is still smarting from a spat with the Kenya Petroleum Refinery Limited (KPRL).

The refinery had detained petrol products worth Sh4 billion over processing fees estimated at Sh456 million—raising fears of supply interruptions .

But on Thursday, the oil marketer said the Energy ministry had ordered the refinery to release the cargo, ending the four year dispute.