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Why Kenyans will have to pay more for fuel

By People Reporter
Thursday, February 13th, 2020
Filling station. Photo/Coutesy
In summary
    • After tax profit recorded by the State Corporation for the year ended December 31 2018.
    • Margin Kenya   drastically cut down its pipeline tariffs last year in a bid to offer more attractive compared to its competitors.

By John Otini

Oil marketers are set to pay more for transport of petroleum products after the energy sector regulator approved Kenya Pipeline Company’s bid to have its tariffs increased.

“The tariffs have been reviewed upwards to Sh5.07 per cubic metre per kilometre for 2019-2020 and Sh4.81 for 2020-2021 and Sh4.61 for 2021-2022 effective February 15, 2020,” reads a Gazette Notice. 

Last year’s review saw tariffs settle at Sh4.2 per cubic metre per kilometre for 2019-2020, Sh3.9 for 2020-2021 and Sh3.7 for 2021-2022. Marketers are expected to pass on the new costs to customers.

“Energy and Petroleum Regulatory Authority (EPRA) has reviewed and approved the applicable Kenya Pipeline Company’s  multi-year pipeline transport tariff for the tariff control period 2019/20-2021/22,” it said in the gazette notice dated February 7.

This comes even as EPRA is expected to announce fuel prices today amid low demand from China due to the coronavirus and US-China trade wars expected to take some pressure off pump prices.

Oil demand is set to fall year-on-year for the first time since the the financial crisis in 2009, due to the knock-on effects of the coronavirus outbreak.

“The consequences of Covid-19 for global oil demand will be significant,” the Paris-based International Energy Agency (IEA) said in a monthly report.

“Demand is now expected to contract by 435,000 barrels per day (bpd) in Q1, the first quarterly decrease in more than a decade.”

The IEA forecast a fall in demand for oil produced by Organisation of the Petroleum Exporting Countries (OPEC), while growth in output by US companies might not be affected until later in the year.

It assumed economic activity from the second quarter would return to normal.

Currently, KPC pumps 80 per cent of all imported oil products in the country with the remaining 20 per cent being transported by road.

This also means that customers further away from Mombasa such as Kisumu (795km) pays a lot more per litre of oil. 

Transport tariffs

The regulator last year slashed pipeline transport tariffs by 50 per cent to stay competitive against the Tanzania corridor.

Pavel Oimeke, EPRA director general had said the new tariffs will not hurt revenues for KPC which had earlier on in the year applied to have the rates increased. 

“The tariff is sufficient to meet revenue requirements for KPC but it also needs to work on operational efficiency to be comparable to international pipeline transport companies like TRANSNET of South Africa,” he said.

 The company made a profit after tax of Sh8.56 billion for the year to December 2018 though margins were expected to fall  due to the impact of the tariff cut.

Oil marketers are the main customers of the products pumped by KPC. The top 10 marketers command a combined market share of 67.7 per cent. They are Total Kenya, KenolKobil, Vivo Energy, Libya Oil, Gulf Energy, Petro Oil, Be Energy, Hass Petroleum, Gapco Kenya and Lake Oil Ltd.

Additional reporting by BBC