The energy sector regulator set record-high rates to compensate for fuel lost along the pipeline from the port of Mombasa, pointing to an anticipated rise in inefficiencies of the network.
The Energy and Petroleum Regulatory Authority (Epra) set the rates at Sh0.16 per litre of super petrol and diesel and Sh0.15 per litre of kerosene in the pricing review for the month ending February 14.
This is an increase of up to 166.7 percent from a year ago and is also the highest ever, with consumers expected to pay a combined Sh62 million or Sh17.14 million more this month based on conservative consumption figures of the three fuels as of September last year.
This is because demand for fuel in the current monthly pricing schedule is anticipated to be higher due to the fall in pump prices compared to the September 15 to October 14, 2023 pricing cycle.
The jump in provisions for the losses signals that more fuel is likely to be lost along the network owned by Kenya Pipeline Company (KPC) this month.
The increase in the rate charged for pipeline losses comes even as KPC says that it is strengthening the monitoring and security of its extensive pipeline from the port of Mombasa to reduce fuel losses.
“KPC has been actively working on improving its systems and infrastructure. The company's commitment to addressing these challenges and minimising losses is reflected in ongoing efforts to enhance security measures and monitoring along the pipeline network,” KPC said in a statement.
“This includes the rollout of a Leak Detection System; the conversion of storage tanks to dome-shaped (for diesel) and the floating roofs (for petrol) to minimize aeration and loss of product through evaporation.”
Pipeline losses are allowable in the transport and storage of hydrocarbons which gets affected by temperature, density and pressure. But fuel is also lost due to theft and leakages along the pipeline.
The losses are part of the pricing build-up that Epra uses to set the monthly fuel prices, meaning that it is passed on to consumers. It is captured as pipeline losses and has a ceiling of 0.25 percent.
In February last year, Epra had set the rates at Sh0.06 per litre for each of the three fuels. The rates traditionally change at every monthly pricing cycle.
The firm has in recent years grappled with cases of vandalism and leakages along its modern 450-kilometre line that was commissioned four years ago.
Parliament has over the years turned the heat on KPC to bolster the security and leak detection system along the pipeline, mainly to ward off vandals.
KPC has in the past had to cope with loss of fuel along the pipeline due to illegal connections and leakages. Some of the cases have cost the firm millions of shillings in compensation.
For example, the firm paid up to Sh13.8 million last year in initial compensation to residents of Thange Valley in Kibwezi after a 2015 oil leak on its pipeline.
The firm had in 2022 disclosed plans to build a new pipeline from the port of Mombasa by the end of this year. But the talk, which came to the fore when KPC was defending higher tariffs for the use of its pipeline has cooled down.
KPC reported pipeline losses of 0.04 percent in the year that ended June 2023, with the loss rate being significantly lower than the maximum 0.25 percent set by the regulator.
The State-owned firm says that its multi-product pipeline is subject to sloping effects from its operations, adding that other losses which are “very rare” occur during maintenance of the pipeline.
KPC posted a throughput of 8.67 billion litres along its pipeline in the year ended June 2023, an increase of six percent from 8.18 billion litres a year earlier.
The increase in throughput volumes signals growing demand for fuel in the local and transit markets even as KPC attributes the rise to ‘oil industry’s trust and confidence in KPC’ systems’.
KPC has commissioned bottom-loading facilities at its depots in Nakuru, Eldoret and Kisumu, saying this will significantly reduce fuel that is lost through evaporation.
Bottom-loading is a system of filling tank trucks by pumping petroleum products through a structure of valves and fittings mounted under a truck. This is the opposite of the top-loading system which is being phased out in most parts of the world.
