6 November 2018

Kenya: Energy Committee Gives ERC 7 Days to Clarify on Status of Jet Fuel Vendors

Nairobi — The Energy Regulation Authority (ERC) has been given a week to submit its findings into allegations by leading oil marketers that there are unlicensed operators engaging in the supply of jet fuel.

Energy Committee Chairman David Gikaria (Nakuru Town East) gave the direction after the ERC Director-General Pavel Oimeke was unable to provide a comprehensive answer to the allegations contained in a petition by Gulf Energy Chief Operations Officer Pius Omollo and Bakri International Energy Company Aviation Manager Agoi Vedell on behalf of the licenses oil marketers.

Gikaria said the Committee will also be calling the Kenya Revenue Authority after it emerged that some operators may be engaging in tax evasion tendencies and inaccurate declaration of goods for importation which may be costing Kenya millions in terms of revenue.

"The Sugar Report failed on the floor of the House because it could not answer whether we have mercury in our sugar or not, that is what we wanted to see in the report. Now when we go back to the House are we going to answer whether we have illegal or we don't have illegal fuel."

"It is easier if you told us we don't have, but when you tell us you are going to investigate, you know we will be depending on you because we don't have the investigating capacity. So that is the task we are giving you and we are going to call you back to tell us that very important question, so that when we go on the Floor of the House, we can be able to say, yes we do and these are the names of the companies and this is the action that has been done," Gikaria stated.

In his response to the petition, Oimeke told the House that the Commission became aware of the allegations after the oil marketers wrote to him in May complaining about the influx of the illegal oil marketers.

Oimeke said ERC could not provide a comprehensive answer because the commissions is still awaiting for response from the Kenya Airport Authority.

He told the Committee that he had written to the Kenya Ports Authority and the Kenya Civil Aviation Authority to request them to strictly enforce the law requiring that any importer of jet fuel through the Open Tender System must be registered to provide the service.

Oimeke went on to dismiss the petition saying that it was influenced by 'operating environment where one feels they are being shortchanged due to competition in the business.'

"The only window we have to curb revenue loss is jet A1, (jet fuel) because it can't be marked with the clear marker that is used to track and tell whether you are mixing it with petrol or diesel but we want to deal with that administratively. We want to be able to monitor every consignment moving from our depots to the various airports because we don't want scrupulous traders to divert that because that doesn't have the same taxes that kerosene now has," he explained.

He defended the two companies - World Fuel Services and Sky Tanking - saying they are licensed to operate as exporters and wholesalers of the commodity. The two were part of 4 companies the petitioners had been named as illegal oil marketers.

The Petitioners, who were represented by Gulf Energy COO Pius Omollo, Amu Power CEO Cyrus Kirima and Gulf Energy, Head of Aviation David Gathange, had earlier told the MPs that it has emerged that unlicensed and illegal agents have stormed oil markets occasioning distortion of market prices and massive losses.

Omollo explained that oil marketing companies have incurred massive losses due to the fact that the local oil marketers have invested in infrastructure and the pricing of the jet fuels is based on the open tender system as stipulated in the law.

They asked the National Assembly to investigate the massive influx of illegal oil marketers in the country with a view to eliminate them or cause them to be licensed in order to operate lawfully.

"We are very, very concerned. We cannot sit back and see our company or our economy going down the drain and exposing the airport at the JKIA to lower standards. Every time that you allow losses to be incurred on oil company will invest at the airport and the standards will go down, they will deteriorate and we will not be able to see any serious airline coming in here because you are exposed to accidents and risks of quality and other things," the Gulf Energy boss said as he presented his petition.

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