11 February 2013

Kenya: Costly Storage Won't Affect Fuel Price - ERC

THE Energy Regulatory Commission has said the high oil storage charges by newly commissioned Vitol Tanks Terminal International Kenya will not be passed on to fuel consumers.

Director general Kaburu Mwirichia was responding to concerns by marketers that while the entrance of VTTI is welcome, its high cost of storage may push fuel costs..

The marketers have called on VTTI to review its charges terming them "too high" compared to existing ones.

VTTI charges $9 (Sh783) per cubic meter for its tanks that it commissioned two weeks ago, compared to other national storage facilities among them Kipevu Oil storage facility and Kenya Pipeline Company.

Kipevu and KPC storage charges stand at $3 (about Sh261) per cubic meter while other private depots charge between $7 (Sh609) and $10 (Sh870) per cubic meter.

"When we are doing the calculations on the final price of the fuel price, we normally use the storage charges at our national storage facilities as the baseline. The high storage fee at VTTI will not have any effect on the final product," said Mwirichia.

He said being a private facility it is be upon the owners and their clients to deal with the storage charge issue.

VTTI Kenya General Manager Merlin Figueira said since the facility is directly linked to to the Kenya Pipeline, its landing costs will be reduced compared to other players .

"We are operating as a bonded facility and at the same time we have our storage tanks directly connected to the pipeline. So the issue of demurrage freight and labor charges will be reduced," said Merlin.

This, he said, will have an automatic positive impact on the final fuel prices to the consumers.He said the direct connection will also reduce theft, accidents and road destruction.

VTTI Kenya beat the National Oil Corporation of Kenya in 2009 to buy the then partially built storage terminal that Kenya Commercial Bank were auctioning to recover loans wowed by collapsed Triton Petroleum owned by run away businessman Yagnesh Devani.

The Sh5 billion facility with a 111,000 cubic meters capacity will be supplying oil products to as far as Kisumu and Eldoret with Uganda, Rwanda, Southern Sudan and the Democratic Republic of Congo set to benefit from the largest facility in the region.

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