Business Daily (Nairobi)
Zeddy Sambu
27 November 2009
According to oil marketers, the Kenyan refinery is holding some 300, 000 tonnes of crude belonging to marketers.
But the KPRL's general manager Mr John Mruttu said the refiner held 139,000 tonnes of crude by Monday this week but the bulk of the consignment was yet to be bought by marketers from the financiers.
The pile-up of unprocessed crude stocks at the Mombasa-based refinery has sparked an operational stand-off that could disrupt supplies in a repeat of acute shortages witnessed during end-of-year festivities, industry insiders said.
Oil marketers say the refinery is holding 300,000 tonnes of crude stocks worth $182 million (Sh13.7 billion) a claim that the petroleum processor has disputed causing a disruption in planning down the supply chain.
Two oil marketers OiLibya and Gapco revealed that they were among the firms that have been hit by the processing backlog warned of possible shortage in the coming weeks.
Other marketers were unable to quantify their outstanding stock levels, according to an industry executive who attended a meeting of the industry operators but did not wish to be named.
"OiLibya have a stock build up for cooking gas while Gapco has four months stocks," he said. Industry players have consequently asked OiLibya, the coordinator of industry supplies to form a sub-committee to address the looming supply shortage.
The proposed measures include emergency supplies procurement to supplement the regular monthly supplies that come to the market through the Open Tender System (OTS).
Most industry chief executives who spoke after the acrimonious Tuesday meeting however remained skeptical about its outcome.
"Unless industry tender arrives on time and refinery does not shut down, then the supply situation might not be normal," added our source.
Bulk consignment
KPRL's general manager John Mruttu however insisted that the refinery had only 139 000 tonnes of crude by Monday this week but the marketers were yet to buy the bulk of the consignment from the financiers.
He denied that the refinery was holding large amount of processed stocks saying it has a low storage capacity of only at 210,000 tonnes.
"We cannot be holding more petroleum than we can physically contain," he added.
"We have a total of 107,000 tonnes of crude under the Collateral Financing arrangement (CFA). Marketers are entitled to 32,000 tonnes worth Sh1.4 billion ," Mr Mruttu said.
KPRL reported during the Tuesday meeting that the industry had under-performed between January-June but a significant improvement has been made in the last three months.
He cited delays in the arrival of crude as well as technical breakdowns due to water and electricity rationing as the factors responsible for the dismal performance within the first half.
Power outages have in the recent past adversely affected some of the processing units at KPRL.
"KPRL's performance month-on-month up to June was bad. But at the end of the November, we will be under processing by up to 30,000 tonnes because we are facing up to 19 days delay in the delivery of crude," Mr Mrutu said. "If crude does not arrive on time, the refinery cannot process."
Energy permanent secretary Patrick Nyoike called the meeting after the oil firms raised the alarm over the refinery's lower-than-expected performance.
"The agenda of the meeting will be to discuss KPRL's under performance leading to stock piling of crude oil whose value is $182 million," said Mr Nyoike.
Piracy attacks
It came moments after KenolKobil warned of imminent supply gaps following incidence of piracy attacks in the Indian Ocean.
KenolKobil has once again won the industry tender to deliver crude oil and diesel for processing at the refinery in January, while Gapco will to deliver petrol and aviation fuel on behalf of all marketers.
Under Kenyan petroleum rules, Kenyan oil marketers are compelled to process 1.6 million tonnes at the Kenyan refinery, each year.
Processing agreements that the KPRL has entered with marketers stipulate that the refinery must process up to 133 000 tonnes per month.
Known as the annual base load, the actual crude processed in any given month depends on the marketer's nominations - they may be over/ under processed compared to their base load.
Marketers can also choose to process marginal crude above the base load (and some do), or they may not wish to participate in a given crude being processed.
A barrel of crude can yield a surprising range of each white product.
KPRL can make very little kerosene, and choose instead to make more diesel out of the same crude.
Each marketer is given the ranges (the databook forms part of our Processing Agreement), and can choose how they would like to cut (or blend) the products.
In July, ESSAR Energy of India acquired a 50per cent stake of KPRL bringing to a close a process that begun in 2007.
Under a strategic partnership between the Government and ESSAR of India, seeks to secure the future of the refinery in terms of the much needed investment in the refinery modernization project, power generation and storage for cooking gas.
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