Sigh of relief as Kenyan oil firms resolve dispute

Saturday September 25 2010

By Dorothy Nakawesi & Joseph Bonyo

Ugandan motorists who have been paying high fuel prices should soon expect a sigh of relief as the Kenolkobil and Kenya Petroleum Oil Refineries Ltd (KPRL) dispute is put to an end.
The dispute, which experts said was the genesis of the current crisis was resolved on Thursday when KenolKobil agreed to pay KSh600 million it owes in fuel processing fees. This saw the company secure back its oil importation license which had been suspended a few weeks ago.

A top industry official, who asked not to be named in order to speak freely, told Daily Monitor that this new development will see oil products start flowing into the country.
“We have started receiving some products and more is yet to come but because of the demand in the market impact may not be felt immediately,” the source said.

Tight situation
Shell Uganda’s Country Manager, Mr Ivan Kyayonka said: “The situation is still tight as little is flowing into the country.” Fuel shortage has pushed prices close to Shs4,000 per litre of petrol and has left several fuel stations empty in many parts of the country.

In a deal brokered by Kenya’s Energy Permanent Secretary, Mr Patrick Nyoike, the oil marketers KPRL have agreed to withdraw all ongoing court and arbitration cases. “The agreement takes effect immediately,” Mr Nyoike told a media briefing on Thursday. “We have signed the deal and they will access the refinery as well as get the licence reinstated.”

The company’s management declined to either comment or give the finer details of the deal, but said it would address a press conference today. The stalemate arose when KPRL raised its processing fees over a year ago but KenolKobil refused to pay, accumulating KSh456 million in arrears, which was later revised to Sh600 million.

In a tag of war that has been running for months and is a subject of court cases both in Kenya and London, KenolKobil lodged a counter-claim of over KSh2billion, which was increased to KSh4 billion, against the refinery for loss of business.

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The firm listed at the Nairobi Stock Exchange and controlling nearly 20 per cent of the local retail market, was barred from refining crude oil at KPRL in July 2010. Oil marketers are required to process at least 40 per cent of their crude imports at the Changamwe-based refinery. The situation was aggravated when the industry regulator, Energy Regulatory Commission (ERC), suspended the marketer from the open tender system and fuel importation business.

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