State strikes new payment deal to end biting fuel crisis


Ministry of Petroleum & Mining PS Andrew Kamau. FILE PHOTO | NMG

Oil marketers will be compensated for extra volumes of fuel sold in the month to April 14, in a move aimed at helping ease the current supply hitches of super and diesel.

Principal Secretary for Petroleum Andrew Kamau gave the commitment on Tuesday saying that extra cargoes sold will be considered for compensation in the next pricing review set for next week.

The assurance will allay fears that had seen marketers reduce the stocks they supply to their branded retail outlets and also stopped selling to independent dealers leading to a nationwide shortage.

The fuel shortage started in the Western and North Rift regions before hitting Nairobi on Friday, triggering panic buying that saw some dealers increase prices and others limit the volume sold per motorist.

“This (letter) is therefore to approve the request by Supplycor to compensate the prudent cost of extra volume sold by OMCs (oil marketing companies) from March 15th to April 14th,” Mr Kamau said in a letter to the marketers on Tuesday.

The marketers had written to the ministry and the Energy and Petroleum Regulatory Authority (Epra) seeking assurances that the cargoes sold outside the pricing review will be compensated.

“We request Epra to consider the possibility of rolling out a compensation mechanism based on the cost of cargoes that are being sold for any extra quantity in the market above the normal retail sales between 15th March to 31st March and from 1st April to 14th,” the dealers through their co-ordination secretariat, Supplycor Kenya said.

Data seen by the Business Daily show that one of the marketers sold 10 million litres on Saturday and Sunday, more than double the four million litres it sells on average every weekend while another sold six million litres up from its two million litres average.

A litre of petrol is retailing at above Sh200 a litre in some filling stations, breaching the level set by Epra in its last monthly fuel review.

In Nairobi, diesel and petrol prices are capped at Sh115.60 and Sh134.72 for the month to April 15— the highest level in Kenya’s history.

An executive who spoke on condition of anonymity said that the request has been necessitated by the increased prices of crude in the global market and the cost of shipping refined fuel last month.

Oil prices soared after Russia invaded Ukraine, with the price of Brent crude oil -- the global benchmark for prices -- hitting a near 14-year high of $139 per barrel at some point last month.

“The request is meant to cover for the February-March period when global crude prices hit record highs meaning that the subsidy will not fully compensate for the deltas,” the executive told the Business Daily.

Marketers last week went slow in evacuating their products from the depots to protest delays in the payment of subsidies to the companies.

The government on Monday paid marketers Sh8.2 billion as partial compensation to help clear arrears, a deal that saw dealers resume fuel evacuation from the depots.

The compensation delays have been attributed to depletion of the fuel subsidy kitty that was rolled out in April last year and global crisis occasioned by Russia’s invasion of Ukraine that led to prices for crude.

The government says it owes the companies Sh13 billion dealers claim the amount is in excess of Sh20 billion.

Parliament on Tuesday ordered the National Treasury and Ministry of Petroleum to table a report on the amount raised through the Petroleum Development Levy and amounts paid to the marketers since September last year.

Kenya rolled out a fuel subsidy in April last year to cushion consumers from the surge in the price of oil in the international markets.

The subsidy scheme is supported by billions of shillings raised from fuel consumers through the Petroleum Development Levy, which was increased to Sh5.40 a litre in July 2020 from Sh0.40.

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