By
Njiraini Muchira, Nairobi KENYA
Kenya
hopes to regain its petroleum export market after cutting pipeline tariffs by
50 per cent, a development that sets up stiff competition with Tanzania.
Nairobi, which had lost about 30 per cent of its
petroleum export market to Dar es Salaam, is also stepping up its crackdown on
fuel adulteration and smuggling, a growing menace costing the government $340
million annually in lost taxes.
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| A new oil jetty at the Kenya Pipeline Corporation depot in Kisumu in western Kenya. Nairobi is wooing petroleum importers with a raft of incentives. |
Last week, the Kenya Revenue Authority in
collaboration with a multi-agency team formed to strengthen co-ordination among
different agencies in curbing illicit trade intercepted a consignment of 7,000
litres of diesel fuel smuggled from Ethiopia.
This comes at a time when the Organisation for
Economic Co-operation and Development estimates that the East African Community
loses over $500 million in tax revenue annually due to counterfeiting.
“KRA has enhanced vigilance at the country’s border
points as part of key measures geared towards stepping up the fight against
illicit trade and counterfeits,” Kevin Safari, KRA commissioner for Customs and
Border Control said in a statement.
Kenya hopes the intensified surveillance and
crackdown on fuel adulteration and dumping will help the country recapture the
petroleum export market from Tanzania.
More critically, Nairobi hopes the lower
pipeline tariffs will encourage petroleum and petroleum products importers to
use the Mombasa port for products destined for neighbouring landlocked
countries like Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic
of Congo.
In the new tariffs imposed by the Energy and
Petroleum Regulatory Authority, oil marketing companies will pay $30.89 per
1,000 litres down from $60 to transport fuel using Kenya Pipeline Company
facilities.
The rates, which will apply for the next three
years, will further be lowered to $30.65 in 2020 and $29.07 in 2021.
“Kenya had lost about 30 per cent of its petroleum
export market to Tanzania mainly due to the high tariffs charged
for pipeline transport,” EPRA director general Pavel Oimeke told The
EastAfrican.
He added that in the past 10 days after the
implementation of the revised pipeline tariffs, the export volumes have
doubled, a trend that is ultimately expected to regain the lost market share.
KPC, which was pushing for an upward review of the
tariffs that include the domestic market, has however protested the reduction
ostensibly on the basis that it will have a negative impact on its bottom line.
The company wanted an increase to raise funds to
service massive debts procured to finance infrastructure investments including
the new Mombasa-Nairobi pipeline constructed at a cost of $473.4 million, and
the four new oil storage tanks in Nairobi that cost $50 million. The company
has also invested $16 million in the Kisumu Oil Jetty.
Mr Oimeke said that KPC has submitted a protest
letter to EPRA, which does not amount to an appeal against the new tariffs.
“They are yet to submit a detailed appeal to us.
What we received is a protest letter. We have written to them and advised on
how to structure the appeal accompanied with justification for each item. We
will objectively review once we receive the detailed appeal,” he added.
According to the Economic Survey 2019,
Kenya’s volume of petroleum exports declined to 739.800 tonnes in 2018, from
842.400 tonnes in 2017.
Although the value of total exports rose by 7.5 per
cent to $374.2 million in 2018 on account of a growth in the value of
re-exports, the value of domestic exports of petroleum products dropped by 15.2
per cent to $40.5 million in 2018.
In the first half of 2019, the value of domestic
exports stood at $11.5 million from $20.2 million in same period in 2018, a 43
per cent decline.
While the volumes of transit petroleum products
imports in Kenya have been on the decline, Tanzania has recorded a significant
rise in imports entering through the ports of Dar es Salaam and Tanga.
Data by the Energy and Water Utilities Regulatory
Authority of Tanzania shows that in the financial year ending June 2018, the
volume of transit products stood at 2.6 million litres compared with two
million litres for 2017, a 35 per cent rise. Ewura, in its 2018 annual report
reckons that importers prefer Tanzania due to the authority’s efforts in
ensuring compliance to laws and standards in the downstream petroleum subsector.
According to Mr Oimeke, the level of petroleum
fuels adulteration in Kenya has significantly reduced since September 2018 when
the anti-adulteration of $0.173 per litre was introduced for Kerosene.
In addition, dumping has significantly reduced due
to improvements implemented to the petroleum fuels marking and monitoring
programme since January this year. The improvements include increased frequency
of monitoring and stiffer penalties for culprits, which has seen compliance
levels for both dumping and adulteration hit 100 per cent as at the end of last
quarter.
“EPRA has increased surveillance and also enlisted
the help of the National Police Service to ensure that the problem is dealt
with,” he said.
He added that EPRA is working with regional energy regulators
under the auspices of the Energy Regulators Association of East Africa to
improve compliance across the region.
The Energy and Petroleum Regulatory Authority has
allowed oil marketing companies to pay $30.89 per 1,000 litres in tariffs, down
from $60 to transport fuel using Kenya Pipeline Company facilities.
The rates will apply for the next three years and
will be further lowered to $30.65 in 2020 and $29.07 in 2021.
Oil marketers pay on average $80 to ferry oil from
Dar es Salaam on trucks but pay $60 tariff on pipeline to Kisumu and a further
$35 to truck the product to Uganda, Rwanda and northern Tanzania buying
countries. Tanzania has also stepped up competition by increasing efficiencies
at the port.
According to the Economic Survey 2019, Kenya’s
volume of petroleum exports declined to 739.800 tonnes in 2018, from 842.400
tonnes in 2017.
But KPC has protested the cut in tariffs.
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