The National Oil Corporation of Kenya (Nock) could be given a lifeline after the Ministry of Petroleum offered the company to import almost a third of all petroleum products consumed in the country.
In a draft regulation, the loss-making state-owned marketing company will be allowed to import 30% of refined petroleum products.
The draft Petroleum (Import) (Quota Allocation) Regulations 2022 grants Nock a 30% quota of petroleum products for diesel, premium gasoline, kerosene and cooking gas.
“The allocation of petroleum product quotas will be imported by Nock,” the Ministry of Petroleum said in a notice to the official gazette dated Feb. 16.
The proposal also requires Nock to give priority to independent oil traders, mostly small and medium-sized companies that are not affiliated with oil majors, when unloading products.
Small operators have in the past accused big brands of unfairness by offering them products at unreasonably high wholesale prices that leave them with little margin at the pump.
“Priority in purchasing petroleum products from the quota holder will be given to retail stations operated or franchised by the quota holder and to operators of independent petroleum retail stations,” the ministry said.
“The Kenya Pipeline Company will allocate up to a maximum of 30% of its total storage capacity for the purpose of allocating petroleum product quotas.”
The notice, however, stated that Nock could lose the import quota if he did not use it within two years.
“A quota holder who has not imported their entire allocation in two consecutive years shall forfeit the unused portion to the Open Tendering System (OTS) until the Secretary of the Cabinet decides otherwise,” he said.
The unused monthly quota will be reallocated through the OTS – the system the local oil industry uses to import petroleum products by contracting the petroleum trader with the lowest bid.
In the past, Nock had been given a similar import quota for diesel, which the state hoped would help stabilize market prices for the product.
This was in line with one of the main mandates of the Petroleum Marketer to stabilize the retail prices of petroleum products.
It was expected that Nock, being state-run, would work with other national oil companies in oil-producing countries to source products directly and, therefore, at relatively cheaper rates.
In turn, it was expected to sell oil at lower rates to retail and wholesale consumers, thereby keeping prices at the pump low.
However, this did not work out due to different factors including a lack of funds to purchase large amounts of fuel.