Kenol back in the market after KPRL out-of-court deal

KenolKobil has been reinstated in the petroleum products supply chain after reaching an out-of-court settlement with Kenya Petroleum Refineries Ltd (KPRL).

The oil marketer on Monday said it has been given the go-ahead to import refined petroleum products and have its crude processed at Kenya’s sole refinery following the settlement.

Last month, the Energy ministry suspended KenolKobil from the competitive open tender system as a buyer and seller over a debt owed to the refinery and failure to lift 19,610 tonnes of fuel produced at the KPRL.

This made it difficult for the dealer to access cheaper refined fuel as it races to reverse the Sh6.2 billion loss for the year ended December.

The settlement of the deal underlines KenolKobil’s quest to end costly legal disputes that partly derailed the sale of a majority stake to Swiss firm Puma Energy in March.

“The management of KenolKobil Limited is pleased to announce that the Company and KPRL have reached an amicable agreement to settle all outstanding dispute matters,” said KenolKobil’s new CEO David Ohana in a statement.

“Consequently, the Ministry of Energy and the Energy Regulatory Commission has reinstated KenolKobil Limited in the Open Tender System (OTS) as a buyer and seller in the supply of petroleum products for the company in Kenya and the neighbouring countries.”

KPRL has been demanding Sh1.2 billion from the troubled oil marketer, money it says it owes as a result of default on payment for petroleum products collected from the Mombasa-based refinery.

On its part, KenolKobil had disputed the amount claiming KPRL owes it Sh3.1 billion in product losses incurred due to inefficiencies at the refinery.

(Read: KenolKobil sues Kenya refinery for Sh3.1bn)

The dispute saw the government lock out the oil marketer from both the OTS and allocation from the refinery, the two main sources of procuring fuel.

Sources with knowledge of the deal reckon that the two firms have agreed to offset their demands against each other, with KenolKobil expected to settle with KPRL.

KenolKobil has put on hold its plan to sell the company to a strategic investor pending its return to profitability, end of costly legal disputes and sale of non-core assets.

Besides the KPRL legal dispute, Kenol is locked in a court battle against Kenya Pipeline Company where it is demanding Sh5 billion. The pipeline company has made a counterclaim of Sh1.6 billion in a dispute dating back to 2009.

Kenol is racing to repair its relations with industry players since Mr Ohana replaced Jacob Segman, who had been CEO for the past 16 years, this month.

The dealer has shed 39 per cent in the past six months to the current price of Sh8.45, making it worst performing stock on the bourse over the period.