20110510
reuters

Nairobi — The government has clashed with oil companies over reports that the price of petrol could go up next week.

It also defended Gulf Energy, which has frequently won tenders to import petrol to the country, against accusations that it was enjoying political patronage from top officials at the Ministry of Energy.

Energy Permanent Secretary Patrick Nyoike termed the reports as "reckless, irresponsible and alarmist" but industry players warned that the price of petrol and diesel per litre would go up by May 14 when the industry regulator announces the new pump prices for the next one month.

Addressing a press conference, Mr Nyoike accused Kenol Kobil of lacking the capacity to predict fuel prices saying only the Energy Regulatory Commission (ERC) is mandated to set the pump prices.

"The report of prices going up is irresponsible, alarming and reckless. The figure given is based on rocket science. I cannot be guided by what Kenol Kobil said because they cannot inform me anything. I do not however want to pre-empt what ERC will say," the PS said.

Kenol Kobil warned on Monday that the price of petrol could go up by as much as Sh6, bringing to Sh15 the total price rise in the past two months.

The firm attributed this to international oil prices which are on the rise and the emergency delivery ordered to cover for the recent shortage, saying they will lead to the new price.

Other industry players who spoke on condition of anonymity to avoid antagonising the government warned Kenyans to brace for hard times ahead as the price of petrol and diesel could go up in the next few days.

They attributed this to the rising international prices and the pricing formulae employed by the industry regulator to determine oil prices.

The players said the price of kerosene and diesel would have gone up by up to Sh10 had the government not intervened by cutting the prices initially by Sh2 and days later, by another Sh5.

The Sh2 price reduction on kerosene and diesel announced by Finance Minister Uhuru Kenyatta has already taken effect but the industry regulator has stated that the additional Sh5 cut announced by Prime Minister Raila Odinga a fortnight ago would take time before being effected.

"If the prices are left to the forces of open market, the price of petrol and diesel in Nairobi could go up by up to sh10 but we expect that the government will be very protective meaning it may only increase the price by Sh4 or Sh5 at the very highest. This is really hurting oil marketers because the government is not factoring in the increasing international prices when applying the formulae," a senior manager at a local petroleum company complained.

A visibly irritated PS vehemently denied reports that Gulf Energy was getting undue advantage over more established oil companies in the award of tenders to import oil because it was connected to top ministry officials. Critics have accused the company of lacking capacity to deliver the huge quantities of petrol required, leading to the shortages.

"Gulf Energy is not politically correct, these are lies being peddled by its competitors. "Who is behind Gulf Energy? Nyoike is not behind Gulf Energy, the honourable minister is not behind Gulf Energy. I don't know of any (political) heavyweight behind Gulf Energy," the PS stated.

He maintained that the company had the capacity to deliver the huge quantities of petrol as it has entered into a financing arrangement with a French firm.

The government, however, warned that the country could yet again experience a shortage of petrol if Kenyans resort to panic buying of the commodity.

"The ministry would wish to advise the general public that the country has adequate stocks and should therefore avoid panic buying," Mr Nyoike said.

The PS attributed the massive shortage experienced last week to the fact that there was a shortfall of 7 million litres of super petrol imported by Kenol Kobil, resulting in major marketers such as Kenya Shell and Total receiving inadequate supply of the commodity.

The situation was compounded by a massive blackout that affected the Kenya Petroleum Refineries in Mombasa resulting in a shutdown.

"The Kenya Pipeline System was affected by delayed evacuation and was shut down on Thursday 28 April 2011. The expected shortfall of super petrol arising from KPRL failure to produce was 20 million litres," Mr Nyoike stated.

To cushion Kenyans against any shortages in future, the government has directed the two firms that have won the tender to import the next supply of petrol, Gulf Energy and Kenol Kobil to increase the quantities of super petrol to meet the shortfall, Mr Nyoike announced. The consignments are expected to arrive in the country between May 22-24 and June 1 - 3 respectively.

The PS announced that the Kenya Revenue Authority (KRA) had also issued a circular telling all its employees that they would henceforth work 24 hours a day, seven days a week to serve oil companies seeking to pay taxes before removing their fuel from Kenya Pipeline depots.

Oil companies are required to pay taxes before they are allowed to remove their fuel from KPC depots, which is also contributing to the delays.

The government has also reduced the period which oil companies are allowed to store their products at Kenya Pipeline depots while arranging to pay taxes to KRA from 30 days to 10 days to eliminate the delays in the movement of fuel, the PS stated.