Oil marketers are demanding compensation for trucking fuel from Mombasa following supply hitches at the pipeline after decommissioning a 40-year-old line, in what will see them raid the fuel subsidy fund afresh.
Correspondence seen by the Business Daily shows that officials of the firms have put the demands on the Energy and Petroleum Regulatory Authority (Epra) after sourcing diesel and petrol from Mombasa for months, claiming that this has increased their costs.
Their demands, if met, will expose the fund to new pressure at a time when the exchequer is struggling to keep the scheme afloat.
Marketers traditionally get fuel supplies from Kenya Pipeline Company depots at the Jomo Kenyatta International Airport and Nairobi Terminal, Konza, Nakuru, Eldoret and Kisumu.
The supply hitches have been partly attributed to the decommissioning of the 40-year-old pipeline commonly known as Line 1 two years ago, which reduced the pumping of fuel from 1,500 cubic metres to 950 cubic meters per hour.
The additional compensation could lead also to increased costs of fuel if the State opts to directly raise it from the pump prices. Distribution costs account for Sh3.35 per litre of petrol and Sh3.05 for every litre of diesel in the monthly review to May 14 at a time pump prices are at a historic high.
A litre of petrol rose to Sh144.62 while that of diesel increased to Sh125.50 in Nairobi with the subsidy preventing prices from soaring to Sh173.70 and Sh165.74 respectively.
“The forum was informed that various OMCs were trucking product from Mombasa to Nairobi and or from Nairobi to western Kenya,” reads part of the notes from the meeting.
“Epra expressed willingness to consider reinstatement of compensation through the pricing formula on a temporary basis.” Director-general Daniel Kiptoo told the Business Daily.
“The gap in supply has been due to decommissioning of Line 1 because of safety issues. Prior to the decommissioning, the combined flow capacity for the Nairobi-Mombasa route was 1,500 cubic metres per hour.
“However, the current flow capacity is 950 cubic metres per hour causing a supply gap.”
The marketers further sought State commitment on the compensation for the trucking costs in the long-term, saying this is key to avoiding supply disruptions similar to the ones witnessed in the past three weeks.