Shell claims Sh3.5bn fuel subsidy arrears as shortage persists


Shell Petrol Station at Ruaraka. PHOTO | DIANA NGILA | NMG

The government owed Shell licensee Vivo Energy Kenya Sh3.5 billion ($31 million) for the fuel subsidy scheme in the year ended December, highlighting the State’s struggles to pay oil marketers for keeping pump prices unchanged.

The oil marketer’s parent company, Vivo Energy Group Plc disclosed the arrears in its annual report for the period under review. The arrears are under the line ‘other government benefits receivable’.

Kenya has since April last year been paying marketers to keep diesel, petrol, and kerosene prices unchanged at the back of a global rally in crude that increased the shipping costs of refined fuel.

Vivo Energy Kenya is the retailer of Shell-branded fuel products and is the dominant petroleum dealer in Kenya with a market share of 21.7 percent. The dealer sold 1.37 billion litres of products last year.

Vivo Energy Group describes government benefits receivable as ‘amounts due from or to the government for oil purchased at higher or lower prices than the price set by the local authority.

“Where the oil purchasing price paid by the Group is higher than the price set by the local authorities, a receivable due from the government is recognised ... to compensate for the higher price paid, “ the London-based firm says.

The unpaid sums in Kenya are the highest in all of the multinational’s African markets ahead of Morocco at $23 million, Senegal ($20 million), and Madagascar ($12 million).

The parent firm says that the introduction of the subsidy in Kenya and the increase of similar compensation in other markets saw its ‘other assets’ rise by $81 million to $398 million in the year ended December.

Vivo Energy Kenya, like other oil marketers, is grappling with delayed compensation from the State for keeping prices unchanged.

The government says it owes marketers Sh13 billion but the dealers put the figure in excess of Sh20 billion.

The compensation delays are behind fuel stockouts that hit the country two weeks ago as oil majors are wary of the government’s commitment to pay them for fuel that was not used to calculate the monthly price adjustments ending today.

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