New regulations to allow State direct oil importsThursday December 29 2022
The State has published regulations to support government-to-government deals on fuel importation amid a push for products from Saudi Arabia.
The government says such deals would carry benefits that were likely to trickle down to consumers in the form of lower pump prices.
Read: Kenya seals deal for cheaper Saudi fuel
The regulations will also see the country access favourable credit periods from suppliers.
“Recognising the need for government-to-government arrangement for importation of petroleum products which may enable the country negotiate for discounts on product cost and freight while at the same time enabling the country to access extended credit periods from suppliers,” the rules state.
“This will save the country from the current pressures on Foreign Exchange Reserves.”
Kenya is in talks to import a third of its fuel from the United Arab Emirates (UAE) on credit in efforts to cut the dominance of oil majors who have been blamed for fuel shortages.
Read: Kenya seeks UAE oil on credit to end fuel shortage
The negotiations will allow the State-owned National Oil Corporation of Kenya (Nock) to ship in 30 percent of the country’s diesel and petrol needs.
Nock will be expected to sell the bulk of the UAE cargo to small independent dealers, who have recently been cut off the wholesale market in a shift that partly contributed to the biting fuel shortage that stalled operations across the country a few months ago.
A State subsidy introduced to ease fuel costs made wholesale prices to nearly match the cost of selling diesel and petrol at the pump, making the business unprofitable to independent players who do not import but buy supplies from the big players.
This partly contributed to fuel shortages that gripped Kenya in March this year given the smaller independent fuel retailers control 40 percent of the market.
The Petroleum (Importation) Regulations, 2022, published in the Kenya Gazette seeks to make key elements of the Petroleum Act, 2019 operational by making it a compulsory requirement to import petroleum products through the Open Tender System (OTS) for efficient planning and to enable the country enjoy economies of scale.
The proposed rules provide criteria for allocating capacity at common-user petroleum import facilities, thereby promoting equity, open access and non-discrimination.
It also recognises and regularises the role of the Supply Coordinator Committee that at the moment plays a critical role in the petroleum import planning process but remains unrecognised in law.
“The primary regulatory objective and justification for the proposed Petroleum (Importation) Regulations, 2022 is to make key elements of the Petroleum Act, 2019 operational by — recognising and incorporating the Transport and Storage Agreement (TSA) between the Oil Marketing Companies (OMCs) and the pipeline operator (KPC),” the regulations states.
Petroleum Cabinet Secretary Davis Chirchir said a detailed review will be undertaken in five years to ensure continued relevance of the regulations to the industry needs.
“The Energy and Petroleum Regulatory Authority has considered all the alternatives and notes that the proposed Petroleum (Importation) Regulations, 2022 have distinct advantages and hence recommends the passing and operationalisation of the regulations,” Mr Chirchir said.
The Petroleum ministry said the changes introduced in the rules seek to consolidate and align the proposed regulations to the provisions of the Petroleum Act No. 2 of 2019.
Mr Chirchir said the proposed regulations seek to enforce the provisions of the OTS in ensuring that petroleum products are imported into the country in the most cost-effective manner.
“The regulations will promote transparency by laying bare all costs involved in the petroleum import process and hence ensure prudence,” he said.
Mr Chirchir said the proposed regulations will also bring clarity and simplicity by consolidating and harmonising various legal notices touching on importation of petroleum products. Among other gains, the changes are expected to deliver fair prices to consumers and secure supply of petroleum products.
He said petroleum importers will benefit from the proposed regulations as they will enjoy economies of scale through common import planning and use of larger vessels.