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ERC plans to cut least oil stocks held by firms [Nation (Kenya)]
[March 17, 2014]

ERC plans to cut least oil stocks held by firms [Nation (Kenya)]

(Nation (Kenya) Via Acquire Media NewsEdge) Inadequate fuel storage capacity in the country has forced the energy sector regulator to come up with new regulations that could cut the minimum stock an oil marketing company must hold by a third.

The draft regulations by the Energy Regulatory Commission propose that marketing companies only maintain fuel stocks to last a minimum of 15 days as opposed to the current threshold of 22 days.

ERC's director for petroleum Linus Gitonga said the move is informed by a number of reasons, primarily inadequate storage capacity.

"There are a number of reasons for the proposed regulations," Mr Gitonga told the Nation in a telephone interview yesterday, listing inadequate capacity for storing the fuel as one such reason.

"There is also the need to reduce the cost of financing so as to reduce the overall price at the pump," he said.

In calculating the minimum operational fuel stocks, products stored at the Kenya Petroleum Refineries Limited's (KPRL) tanks, the Kipevu Oil Storage Facility, the Kenya Pipeline Company, marine tankers and marketers' storage depots will all be taken into account.

If adopted, the proposed regulations, which were published in the Kenya Gazette last Friday, could expose consumers to high fuel prices in case of disruption in supply as they reduce the lifetime of the marketers' reserves.

SHORT-TERM SUPPLY The Energy Regulatory Commission has, however, maintained that the need to ensure that there is short-term supply of petroleum products in case of supply hitches has been taken into account in drafting the regulations.

"The minimum operational stocks shall be maintained in order to ensure short-term supply of petroleum products in the event of disruption of supply of such products," the ERC said in the gazette notice.

Since operations at the Kenya Petroleum Refineries Limited stalled last year, local demand is being met through imported fuel, a situation that has created pressure on available storage facilities.

With the country currently relying squarely on imported products, the National Oil Corporation of Kenya is yet to complete the construction of the second offshore fuel offloading jetty further.

This has compounded the risk of fuel supply challenges should the facility currently in use break down.

The country's total fuel consumption per year is estimated at 4.5 billion litres.

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