Fix bureaucratic licensing in the petroleum sector – Business Daily
Committing a lot of idle cash to KPC is hitting oil marketers. PHOTO | SHUTTERSTOCK
s the new government takes shape, the incoming Energy and Petroleum Cabinet Secretary should fix the bureaucratic licensing oil marketers go through.
The licensing is tedious since applicants have to move between the Energy and Petroleum Regulatory Authority (Epra), Kenya Pipeline Company and the ministry.
The processes at Epra and Kenya Pipeline take about a month each to obtain a licence.
Epra requires oil marketing companies to renew licences annually. In Uganda licences are granted for a minimum of five years.
What does the annual renewal mean for someone who has invested millions of dollars in the sector?
At Kenya Pipeline, they ask you for a wheelbarrow-load of documents. This slows investors down seeking to join.
At the ministry, you request to sign an open tender system agreement to participate as a shipper and be allocated product volumes.
The new CS should also fix throughput allocation as there is a tussle between the ministry and Kenya Pipeline on who allocates volumes to oil marketers.
The process of throughput allocation should be a reserve of Kenya Pipeline as it is the ultimate authority that determines whether it has the capacity for requested volumes.
The whole licensing including the signing of OTS Agreement should be managed by Epra while KPC should handle the throughput and line fill, making it part of the transport and storage agreement.
Tendering should also be the mandate of Epra. On line fill, the policy is that oil marketers should put a million litres in the KPC tank system equivalent to a million dollars going with the current product prices.
KPC is a business entity that charges oil marketers thousands of dollars monthly for transport fees. It should decide what they want to be; a profit-making entity or a public service provider.
They should eliminate the line fill requirements and allow the oil firms who deposit line fill with them to access these products to unlock more than $100 million tied-in line fill.
This will boost their working capital positions among other industry benefits.
Why should oil marketers commit all that idle capital to KPC which already makes money from them and still wants them to provide product in the pipelines to facilitate fuel pumping?
KPC is a business entity and should invest in the line fills just like the private storage facilities do and refund marketers who are in dire need of cash flow to sustain operations given the high cost of fuel.
Idle capital can stay for between five and 20 years without adding value to a business.
Most of these bureaucracies were lobbied by multinationals that were taken aback by the sudden rise of local companies since the liberalisation of the sector.
There is therefore a need to review these processes to allow hardworking Kenyans do business without breaking their backs.
The writer is an oil and gas consultant. [email protected]; @husseinyusufi
