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Economy

Sh2.4bn jet fuel missing as oil firms blame KPC

Kenya Pipeline Company’s depot in Eldoret.
Kenya Pipeline Company’s depot in Eldoret. FILE PHOTO | NMG 

Oil marketing firms are locked in a war of words with the Kenya Pipeline Company (KPC) over the alleged loss of 51 million litres of jet fuel valued at over Sh2.4 billion, with the two trading blame for the recent supply crisis at the Moi and Jomo Kenyatta international airports.

Claims of the alleged loss come just weeks after forensic auditors were called in to check on another alleged fuel leakage in the KPC pipeline and storage system.

The landed price per litre of jet fuel was Sh47.51 in February.

This translates into a possible Sh2.44 billion hit on the oil marketing companies (OMCs) whose ability to pass the cost to consumers is limited by fuel price controls.

It is the second time in under six months for KPC to face stock queries after another Sh1 billion stock difference prompted audit of the State agency’s systems.

While fuel imports ordinarily “shrink” due to evaporation and leakages in the transportation and storage system, oil marketers have often differed with KPC on the allowable extent of losses.

Main airports

The latest jet fuel shortage that nearly grounded the country’s two main airports has seen oil marketers insist that they imported sufficient stocks to service the aviation sector, terming the 51 million litres jet fuel shortage as a crisis of KPC’s making.

In a letter to KPC, the oil companies’ Supply Co-ordination Committee says there is a significant difference between the amounts of jet fuel stock reflecting in books compared to what is in the KPC system.

The letter was written in response to a March 4 letter by KPC to OMCs stating that it had only 10.52 million litres of jet fuel in stock, accusing marketers of not placing enough orders to match demand.

“We wish to advise that this reported low Jet A-1 stocks and looming fuel crisis within KPC system is not clear to us,” wrote the oil companies.

They argued that as at March 4, the total loadable stocks held by all OMCs was 29 million litres. This, they say, added up to 61.78 million litres of jet fuel stocks imported when added to line-fill quantity of 32.78 million litres.

“It is therefore evident that there is a huge variance between KPC books and the physical stocks,” says the OMCs.

“The 51.26 million litres variance of our jet stocks in the KPC system requires an explanation from KPC as we have already imported this stock and discharged it into the KPC system and the same confirmed by your records.”

Airlines taking off from Jomo Kenyatta International Airport (JKIA) in Nairobi were forced to fly to neighbouring airports for fuelling as stocks of jet fuel neared depletion last week.

Board meeting

The KPC board Wednesday held a morning meeting over the matter that now deepens the stocks row between it and oil marketers.

KPC chairman John Ngumi said the firm cannot explain the cause of the difference in stocks until the ongoing forensic audit by London-based consultancy services firm, Channoil Consulting, is concluded.

“We have seen the letter but we are awaiting the forensic audit. The firm has about three weeks to go then we will have a comprehensive position,” Mr Ngumi said in a phone interview.

“Technically, there should be no difference between physical and book stock values because the automated systems are meant to transfer data automatically from the meters at the pipeline and depots to the accounting books.”

The differences between book and physical stocks set up the country for potential future shortages since the oil marketers rely mostly on book stocks in making orders. Such shortage had also been witnessed in 2014.

The ongoing audit is supposed to comb through the entire systems of KPC and establish stock levels as well as help explain reasons for discrepancies.

KPC last year told OMCs that more than 23 million litres of fuel were lost, mainly through spillage.

The oil firms, however, disputed the position, prompting the audit.

Final report

The seven-week process started on February 18. KPC’s management will have an opportunity to respond to queries from the findings before a final report is made public.

“The answer may be that our systems are wrongly calibrated or people have been stealing or that we have got leakages or any other reason. We are all eager for the answer,” said Mr Ngumi.

On Thursday last week, KPC acting managing director Hudson Andambi had written to Kenya Civil Aviation Authority (KCAA) director-general Gilbert Kibe instructing him to direct scheduled operators to fuel elsewhere.

He also directed non-scheduled operators not to fuel at JKIA.

Mr Kibe Wednesday said the fuelling restrictions have now been lifted, following the delivery of new stocks.

“We received a letter from KPC dated March 11 lifting the restriction. Normal supply has resumed and non-scheduled operators can now also refuel,” he said.

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