Shell takes on regulator over notice on sale of impure fuel

Oil marketer Vivo Energy, which sells Shell branded products, is locked in a row with the energy regulator for publicly naming it alongside other dealers found to have mixed diesel with kerosene for higher profits.

Polycarp Igathe, the Vivo managing director, Monday faulted the Energy Regulatory Commission (ERC) for naming oil dealers in newspapers after tests exposed 56 petroleum stations for malpractices.

Mr Igathe reckons that the ERC had already punished them including slapping fines on dealers and it was unwarranted to shame the marketers in the newspaper notices.

But the regulator has hit back and insists it has a duty to inform consumers of dealers or outlets adulterating fuel—which has the effect of damaging car engines.

“We have a moral and legal duty to Wanjiku (Kenyans) to caution them on the vices in addition to us taking action against unscrupulous marketers,” said Edward Kinyua, the acting director of petroleum at ERC.

The ERC says that cash-hungry marketers have turned to petroleum adulteration, where diesel or petrol is mixed with cheaper kerosene, which attracts lower taxes, in search of bigger margins.

READ: Energy regulator releases kit to check fuel mixed with kerosene at oil depots

The regulator also named dozens of dealers, mostly small dealers, diverting fuel meant for neighbouring land-locked countries for sale in the Kenyan market since the export petroleum is not taxed locally.

“We shall be suing ERC. This is double jeopardy; a smear campaign against Shell,” Mr Igathe said when reached for comment adding that the company would stop selling retail kerosene at the pump.

Four of Vivo Energy’s 165 service stations were found to have mixed diesel or petrol with kerosene for sale to unsuspecting motorists.

The affected branches, which were temporarily closed by ERC but later reopened, include Shell Valley Road in Nairobi, Gatundu station (Kiambu), Wundanyi branch (Taita Taveta) and Kisii station.

The marketer, which is second in market share behind Total Kenya, paid outstanding taxes and penalties to the Kenya Revenue Authority ranging from between Sh300,000 and Sh1 million for each station.

Mr Igathe said the image of the oil dealer was at stake and could affect business, putting jobs on the line.

ERC said that the law empowers the commission to publish a list of petroleum stations that have committed offences such as sale of adulterated petroleum products or those earmarked for export in the local market.

“The ERC is empowered by the Energy (Retail Facility Construction and Licensing) Regulations of 2013, Legal Notice No. 7 of 28th January 2014 to publish a list of retail dispensing stations that may have committed offences under the Energy Act, 2006.”

Other large marketers implicated in the fuel adulteration ring are Total Kenya (Sagana station in Kirinyaga), National Oil (Olkalou station, Nyandarua), Oilibya (Petju station, Laikipia) and KenolKobil’s Ruiru station.

The services station have all been reopened after the dealers paid fines and upgraded the contaminated petroleum.

Contaminated petrol and diesel causes engine malfunction, according to ERC and amounts to tax cheating, together with dumping of export-bound fuel in the local market. It also results in excess exhaust emissions.

The Petroleum Institute of East Africa (PIEA) — the oil dealers’ lobby — reckons that a large share of kerosene is used for adulteration.