Nock unveils plan to influence prices

The National Oil Corporation of Kenya (Nock) is looking at establishing more petrol stations across the country to actively carry out its role of influencing market prices.

The corporation formed to stabilise and influence pump prices, has largely been forced to follow the dictates of the market controlled by private players, mainly the multinationals.

“We are unable to fulfil one of our core functions of influencing market prices for petroleum products as our market share is minimal,” said Mwendia Nyaga, the Nock managing director.

Nock intends to grow its retail distribution network from 61 to 165 stations in the next three years.

Besides, it plans to set up an oil terminal at Mombasa to store its fuel.

“We are depending on other parties which limit the amount of fuel we can stock subsequently rendering us unable to influence market prices especially when crude prices are low.”

The MD says Nock can effectively play this role by stocking fuel when international prices are low to counter times when they rise.

“We intend to raise our presence though more acquisitions, partnering with existing independent players and setting up greenfield operations”, said Channus Genga, Nock marketing manager.

The government formed Nock in 1981 to control rising pump prices following the Iran-Iraq war which led to the global oil shock.

However, the limited presence of Nock at the retail level denied it the muscles to take on multinationals who had a stranglehold on the retail market.

Following the liberalisation of the petroleum industry in the 1990s which opened the door for local independent players to enter and fight for a market share, pump prices have largely not recorded any significant downward trend due to the massive control branded players have had on the market.

Independent dealers are estimated to control 30 per cent of the market with 70 per cent in the hand of branded oil marketers who are largely multinationals.

The cycling nature of petroleum prices at the international level has seen local oil marketers raise their pump prices in tandem with rising crude prices but refusing to lower when it goes down.

Mr Nyaga indicated that the need to ensure Nock is able to influence prices can only occur if it established itself significantly across the country and drive the price-setting agenda.

During desperate times, the government has threatened to intervene and cap the pump prices to no avail.

In the last two years crude has risen to an all time of $145 per barrel which led to local pump prices rising to Sh108.

The rapid rise in crude prices was attributed to insatiable demand from China to fuel its rapidly growing economy.

However, prices have stabilised with current Brent crude costing $77 per barrel.

Local pump prices are hovering between Sh81 to Sh87 per litre for petrol and Sh64 to Sh68 per litre for diesel.

NOCK has revamped its operation through acquisition of a number of outlets from existing players leading to an increase in its retail outlet subsequently its bottom line.

Recently, NOCK through a government backed initiative managed to acquire retail outlets from Shell when it was merging its business activities with BP.

Similarly, it got additional outlet owned by Chevron which was bought by Total as it was exiting the local market.

Its presence has further been enhanced when it acquired Somken Petrol Station which exited the market. Somken had its operation concentrated in Western Kenya.

The expansion drive has seen NOCK increase its output to 210 million cubic metres valued at Sh14.1 billion.