New rules, penalties slapped on oil import tenders after supply hitch

New regulations have been released to govern tenders on import of oil in the wake of a botched supply of aviation fuel. FILE PHOTO 

In Summary

• The default penalty was also enhanced to $20 per tonne — double the current rate — while delayed deliveries will attract a $10 per tonne fine per day.
• Three years ago, State-owned National Oil Corporation of Kenya messed imports of diesel to the country, with consumers being forced to shoulder a $10 million (Sh88 million) burden.

By Nation Reporter
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New regulations have been released to govern tenders on import of oil in the wake of a botched supply of aviation fuel.

 

The new rules, which were agreed on Thursday by the oil industry, Ministry of Energy officials and the industry regulator, Energy Regulatory Commission, are to be gazetted by the Energy Cabinet secretary to become law.

Bidders in the Open Tendering Sytem will henceforth be required to have been trading locally for the past two years. They must also service a requirement of one million litres of line fill/ dead or reserve stock at the pipeline tanks.

“We need proof of trading in petroleum products in the local market for two years without default as off takers/ buyers during this period,” said the letter on the proposed rules.

This, coupled with the perceived issue of double licensing, also came under review following the current industry scare where Kencor Petroleum Ltd, with an export licence, could still win import tenders on behalf of all Kenyan firms despite it not having a local footprint.

The default penalty was also enhanced to $20 per tonne — double the current rate — while delayed deliveries will attract a $10 per tonne fine per day.

“The performance bond will be cashed in the event of default in cargo delivery and where an emergency cargo has been called. The industry’s oil tankers’ scheduling committees will determine the default and need for emergency tenders,” the rules read in part.

If performance is not available, the supplier is considered to have defaulted and a fresh tender will be called. The defaulter will be locked out of supply.

“KPC will withhold the line fill in the event of potential liabilities for any bidder who withdraws their bids before the offer validity,” says the proposed rules seen by the Nation.

Three years ago, State-owned National Oil Corporation of Kenya messed imports of diesel to the country, with consumers being forced to shoulder a $10 million (Sh88 million) burden. This prompted rivals to push for higher penalties, meaning only firms with good financing and supply lines would tender.

It is understood that another import firm also defaulted on its cargo requirements last December.