Oil marketers push ERC to blacklist illegal gas resellers

Money Markets

Oil marketers have asked the energy regulator to step up quality checks on gas resellers. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• The marketers, through the Petroleum Institute of East Africa, say unlicensed gas operators are gaining an unfair advantage as they do not incur cylinder investment costs.
• But independent dealers say majors feeling the heat of fresh competition.
• The Energy Regulatory Commission recently published a list of fuel stations caught adulterating fuel, which significantly included the oil majors.

Oil marketers are lobbying the Energy Regulatory Commission (ERC) to extend the vigorous fuel quality monitoring to cooking gas resellers even as independent dealers said the campaign was a reaction to retail competition.

The marketers, through the Petroleum Institute of East Africa (PIEA), say unlicensed gas operators are gaining an unfair advantage as they do not incur cylinder investment costs.

The regulator recently published a list of fuel stations caught adulterating fuel, which significantly included the oil majors.

“We hope that the ERC will replicate this in the LPG business segment where we can also have inspection, monitoring and enforcement of ERC’s action,” said PIEA general manager Wanjiku Manyara.

“Publishing the LPG inspection and monitoring reports, along with the action taken by the regulator on the lawbreakers, would promote accountability on the part of the regulator and certainly contribute significantly in reducing the current malpractices in the LPG business segment.”

PIEA claims that seven out of 10 gas cylinders in the market are illegally refilled posing danger to users. Past attempts by ERC to crack down on the independent traders, as opposed to the affiliated suppliers, have been frustrated by Nairobi County.

READ: 84 cooking gas dealers risk ban on safety fears

According to Ms Manyara, the consumer ends up paying the same for genuine and illegal products in spite of the non-compliance on safety checks, cylinder re-validation, gas specifications, quantity and VAT remittance.

Standardisation of cooking gas cylinder valves allowed the smaller independents to gain a foothold in the market previously in the grip of the large marketers as they could refill any cylinder.

“We know that there are these kinds of illegal gas sellers, but all independent sellers should not be branded together. We usually see these kinds of claims when the market share of the big multinationals is threatened,” said Kenya Independent Petroleum Dealers Association (Kipeda) vice chair Keith Ngaruchi.

ERC in a letter dated March 3 had called upon the Nairobi county government to suspend licences of 84 LPG depots and retail points, saying inspections had found them flouting safety rules.

City Hall, however, declined to close them down on the grounds that the regulator had not furnished enough evidence to support the claims. The independent dealers say most of the gas comes from the major dealers who make big cash at the wholesale level.

“We get the gas from the same sources. Indeed these big marketers are the ones selling to us, as we don’t have the capacity to import the gas ourselves,” said Mr Ngaruchi.

The Energy Bill 2014 proposes raising the fines levied on unscrupulous gas traders from Sh5,000 to Sh1 million, amid complaints that the previous laws were lenient and encouraged the unlicensed trade.