Petroleum economist in the Ministry of Energy and Petroleum Joseph
Wafula opens tenders submitted for the Open Tender System for crude and
petroleum products at the Ministry on February 24, 2009. The Ministry of
Energy and Petroleum has released new rules to guide importation of
fuel under the country’s centralised purchase and distribution system.
PHOTO | LIZ MUTHONI |
NATION MEDIA GROUP
The Ministry of Energy and Petroleum has released new rules to
guide importation of fuel under the country’s centralised purchase and
distribution system.
Under the fresh guidelines, oil
marketing companies willing to participate in the Open Tender System
(OTS) are required to have been marketing petroleum products in the
local market within the last two years.
Petroleum
economist at the Energy ministry, Mr Joseph Wafula, told the Nation by
telephone that the new rules have been adopted to lock out oil marketing
companies that lack capacity to deliver on the tender requirements from
participating in the OTS.
“We want to do away with
companies that obtain licences just for the purposes of participating in
the tender while they lack the required capacity. This situation has in
the past led to huge losses in the industry,” he said.
Effective
December 1, the guidelines also require winning bidders to provide a
performance bond within four days after award of the tender.
The value of the performance bond is set at $20 per tonne. It will be cashed in the event of a default in cargo delivery.
“In
the event that the performance bond is not submitted within the
stipulated time, supplier shall be deemed to be in default and a fresh
tender for the defaulted cargo shall be called by the ministry. The
defaulting supplier shall subsequently be locked out of participation in
the OTS,” read the guidelines.
FRESH REGULATIONS
The new OTS rules also prohibit closing or opening of tenders on Fridays or workdays falling immediately before public holidays but gives exception for emergency import declared by the Energy ministry.
The new OTS rules also prohibit closing or opening of tenders on Fridays or workdays falling immediately before public holidays but gives exception for emergency import declared by the Energy ministry.
Representatives
of 44 oil marketing companies currently participating in the
centralised tender system are expected to endorse the fresh regulations
before they become effective.
Currently, bidders are
required to name their financiers while importers are charged $2 per
tonne if they default on delivery of specified cargo volumes. A tonne
has 1,180 litres.
The new OTS rules have been adopted
to salvage the fuel procurement and distribution system after past
instances, where importers have defaulted on delivery, have left oil
marketers in losses and disgruntled.
In June, Kencor, a
company licensed by the Energy Regulatory Commission (ERC) for transit
business but which has no known retail network in Kenya failed to
deliver 52,239 tonnes of jet fuel.
124 MILLION LOSS
Kencor
was supposed to deliver the fuel between June 12 and 14 but failed due
to what it termed as “problems encountered at the port of loading.”
It
is understood that oil marketers relying on this cargo suffered an
estimated Sh124 million loss as a result of the default. Kencor is said
to have agreed to compensate the affected marketers up to $900,000.
The
situation led industry players to question the ministry’s decision to
allocate the import tender to Kencor which they accused of negligence by
informing them of the said challenges only two days from the cargo
delivery window.
Three years ago, State-owned National
Oil defaulted on delivery of diesel, a situation that left consumers to
shoulder a $10 million bill incurred as a result of procurement of
emergency and more expensive supplies to prevent a shortage of the
product in the market
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