Kenya Pipeline seeks to raise storage fees for oil traders

Tankers at the loading area of ​​the Kenya Pipeline Company’s Eldoret depot. [Kevin Tunoi, Standard]

The Kenya Pipeline Company (KPC) has asked for an increase in the fees oil marketing companies pay to use its network of pipelines and storage facilities.

The company, in a tariff application to the Energy and Petroleum Regulatory Authority (Epra), is considering higher fees from oil companies as part of an offer to recover the funds it spent on the construction of the new Mombasa-Nairobi pipeline. The pipeline tariff is reviewed every three years, with the last review taking place in 2019.

In the review, Epra reduced the charges that oil traders who import products for other regional markets using the Kenyan route pay KPC while slightly increasing the charges for local players.

The then regulator argued that Kenya needed to regain and protect the market share it had lost to Tanzania, oil traders in markets such as Rwanda, DR Congo and parts of Uganda increasingly preferring Tanzania to Kenya due to higher costs.

Epra said it received a tariff application from KPC in January this year for the period between 2022/23 and 2024/25. KPC revised the application in July to take into account the recovery of costs incurred in building the new pipeline.

“KPC further submitted an amended tariff application on July 18, taking into account the capital expenditure for the capacity improvement of the eastern section (Mombasa-Nairobi) of the pipeline and the proposed revised throughput forecast,” Epra said. in a notice to stakeholders yesterday.

The regulator said it would submit the tariff application for public participation between August 22 and September 7. The new pipeline began operations in 2019 and was constructed at a cost of 48 billion shillings.

The regulator in the 2019 review set the rate at $39.84 (4,780 shillings at current exchange rates) per 1,000 liters of oil marketing picking product for export markets at its Eldoret terminal during the 2019/20 tariff period, with almost similar rates for Kisumu and Nakuru Terminals.

This would gradually reduce to $36.22 (Sh4,270) per 1,000 liters in 2021/22. This was a $60 (Sh7,080) reduction in the previous rate. For local players picking produce at the KPC industrial estate depot, oil traders paid a rate of 2,281.50 shillings per 1,000 liters in 2019/20, which fell to 2,074.50 shillings per 1 000 liters in 2021/23.

Transport and storage rates, like other costs of delivering fuel to consumers, are generally passed on to motorists in the form of higher pump prices.

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