Kenyan taxpayers at risk of Ksh.3.2 billion loss in cancelled fuel shipment

This follows the cancellation of a multi-billion shilling fuel contract just hours before the cargo docked at the Port of Mombasa.

The Senate Energy Committee is now probing the circumstances under which the contract was awarded and later cancelled, amidst fears that Kenya could be hardest hit if the Middle East situation escalates.

The high-stakes drama unfolded in the chambers of the Senate, where officials from the Kenya Pipeline Company and Oryx Energies were put to the sword.

At the heart of the storm is a shipment of 96,000 metric tonnes of fuel that never made it to the pump, but might still cost the public billions in damages.

Oryx Energies MD, Angeline Maangi, painted a picture of a company left out in the cold. She argued that the cargo was already on the high seas when the plug was pulled, leaving them with astronomical costs.

Maangi said the request to supply the fuel came procedurally directly from the state department of petroleum and required a two-and-a-half-hour acceptance, which the company agreed to.

“The damages we incurred are upwards of 25 million dollars, that is Ksh.3.2 billion, in the form of demurrage, premiums, and other related costs. Our pricing simply reflected the global market at the time, where supply disruptions forced us to compete with Asian buyers at any cost,” Maangi noted. 

But the senators were not convinced by the oil marketer’s explanation, especially with Oryx quoting prices nearly double the government’s benchmark.

Kakamega Senator Boni Khalwale and Narok Senator Ledama Olekina led the charge, questioning the transparency of the procurement process and the secrecy surrounding the country’s actual fuel stocks.

“We cannot have a situation where a private entity is allowed to bid at double the market price, only for the contract to be cancelled at the last minute,” Khalwale noted. 

“KPC, you cannot tell us the amount of fuel each OMC has in stock,” Olekina remarked. 

KPC’s Acting Managing Director, Pius Mwendwa, found himself in a tight spot. He admitted that while KPC has fuel in its depots, the country lacks a strategic 90-day reserve, leaving Kenya vulnerable. He also declined to disclose how much fuel is held by individual oil marketing companies, citing confidentiality agreements.

“KPC is unable to disclose information relating to individual oil marketing company entitlements without committing grave breaches of contract. We operate on a replenishing model. However, I agree the country requires a strategic reserve for 90 days, but that requires policy engagement beyond just KPC,” Mwendwa noted. 

As it stands, a ship carrying substandard fuel remains within the system, and a Ksh.3.2 billion bill is looming.

The Senate committee, chaired by Dr. Oburu Oginga, has vowed to investigate further why the cargo was flagged only after it was too late to avert a potential legal claim.