KPC Introduces New Fee to Ease Storage Problems

OIL marketers will be charged a new fee for delay in taking up their allocated fuel from Kenya Pipeline in a new plan to ease congestion.

The marketers will now pay $32 (Sh3, 269) per metre cube for fuel that overstays at KPC.

The measure, according to KPC, is to ensure speedy evacuation of oil products to create space at its storage facilities.

Ullage is the space within the KPC system for storing products, usually given to oil markers for use during importation of fuel and transfer to their storage and pump stations.

According to acting managing director Flora Okoth, there has been a tendency by some oil marketers to keep products longer, denying others space.

This, KPC added, was especially the case among marketers who do not have the market capacity for the large volumes of fuel that they order.

“There has been a tendency to keep products in our system longer than desired. We have come up with a solution for that by introducing some additional charge for marketers to move away, so that they create space in our system for more products to flow in,” said Akoth.

She was speaking on Wednesday during the signing of a $350 million (Sh35.6 billion) loan between the company and a consortium of six banks, to finance the construction of a new 450-kilometre pipeline from Mombasa to Nairobi.

The project will see KPC put up a 20-inch ultra-modern multi product oil pipeline, replacing the current 14-inch width pipeline which has been in use for over 30 years.

It will also include installation of new pumps at Changamwe, Maungu, Mtito Andei and Sultan Hamud stations as well as two booster pumps at Kipevu station.

Akoth noted that there has been an increasing demand for space, which has seen a new system formulated to address the challenges.

The system by the Energy Regulatory Commission will see marketers receive allocations, based on their uptake capacity from the main storage in Mombasa.

The system replaces the old fuel allocation formula which was based on the player’s market share.

ERC has previously blamed the market share formula for fuel shortage.

According to ERC, some marketers hoard fuel hoping to sell to major players when their stocks are out.

Ullage will now be determined by the company’s evacuation capacity over a three month period.

“… .those that are able to move products out of the system are able to access more space. That will be an additional incentive to clear the line for use by many more and to keep fuel stations wet,” she added.