Markets & Finance

Regulator due to release new rules on fuel import tenders

fuel

A view of the Jomo Kenyatta International Airport (JKIA). Photo/Diana Ngila

New regulations will be put in place to salvage the credibility of the centralised fuel purchase and distribution system in the country in the wake of a glitch in supplies of aviation fuel.

Known as the Open Tender System, the rules have come under sharp focus after a Kenyan registered company, Kencor Petroleum Limited, failed to ship in jet fuel throwing the country on the verge of an aviation crisis.

The proposed review will see a mandatory execution of a performance bond for any tender bidder to provide security for the importers and act as a deterrence against negligence. This comes even as emergency measures were put in place to guard against shortages expected to bite from next Tuesday.

Currently, bidders are just required in the bid documents to name their financiers. Importers are currently charged $2 (Sh170) a tonne a day if they default.

Oil firms, however, say this is negligible and want the penalty increased to at least $10 (about Sh850). A tonne has 1,180 litres.

Kencor was expected to deliver some 52,239 tonnes of jet fuel known as Jet A1 between June 12 and 14 but failed to do so saying “it encountered problems at the port of loading”. The oil firm has no known retail network in Kenya but is permitted by the Energy Regulatory Commission to deal in imports, exports and wholesale business.

It has been in business for the past three years. “They delivered nine cargoes last year, one cargo in 2012 and three so far in 2014”, said an industry executive who requested anonymity.

Three years ago, state-owned National Oil Corporation of Kenya botched imports of diesel into the country after which consumers were forced to shoulder a $10 million (Sh88 million) following procurement of emergency and costlier supplies in mitigation.

KenolKobil, Kenya’s second biggest oil firm and Gapco will each ship in a parcel to fill in the anticipated deficit. The pair, along with Galana Oil and Gulf Energy are regular winners for OTS tenders held monthly.

On Monday, the Mombasa- Nairobi line was shut to other products to await pumping of expected fresh supplies next Tuesday to Nairobi where the shortage was set to start biting.