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Why Kenya Pipeline is raising transport costs – Business Daily

Kenya Pipeline Company [KPC] petroleum storage facility in Industrial area, Nairobi in this photo taken on January 22, 2021. PHOTO | JEFF ANGOTE | NMG
Kenya Pipeline Company (KPC) will be handed more than Sh1.4 billion a year from the proposed transport, storage and handling tariffs of refined fuel, as it seeks more billions to build a new pipeline.
KPC says that the cash will be used to build a new pipeline from Mombasa to Nairobi by December 2024 as the company races to meet increasing demand in the local and regional markets.
Transport tariffs will rise to Sh3.87 per cubic metre for every kilometre in the year ending June 2023 from the current Sh3.56. This will further increase to Sh4.09 in the year to June 2024 and Sh4.06 a year later.
Storage tariffs will increase to Sh874.44 per cubic metre in the year to June 2023 from the current Sh696.83. This will further rise to Sh960.09 in the year to June 2024 and Sh998.90 a year later.
“We have lined up new investments. We are putting up a new line (Mombasa-Nairobi) and that is going to cost us quite a bit of capital,” Elizabeth Akinyi the Chief Planning Officer of KPC said on Wednesday when during a public participation forum for the proposed tariffs.
“We have submitted to Treasury proposals to enhance capacity of the eastern line by installing a new line and if allowed we should be having a new line running from Mombasa to Nairobi.”
The estimated revenues will be higher given that the Sh1.352 billion is based on the annual throughput of KPC that was 7.6 million litres annually in the 2021/22.
KPC says that the throughput will marginally increase in the three years that the new tariff will be in place on growing demand in the local and transit markets.
The State agency in charge of transporting and storing refined fuel submitted the proposed tariffs to the Energy and Petroleum Regulatory Authority (Epra).
Pump prices are expected to increase by Sh0.54 per litre in Nairobi and Sh0.29 in Western Kenya if the new tariffs are approved, increasing the burden of high costs of super and diesel.
KPC took a hit from the current storage and transport tariffs weakening the company’s ability to scale up investments in a bid to retain a competitive edge against Tanzania in the battle to serve East Africa’s landlocked countries.
Epra lowered the tariffs three years ago amid protests from KPC that sought Parliamentary support to reverse the decision by the energy regulator.
The energy regulator lowered the tariffs to win back importers from landlocked countries who had opted to transport oil through Tanzania due to the high KPC charges.
KPC’s revenue from throughput dropped 17 percent to Sh26.1 billion in the 2019/20 financial year highlighting the impact of the reduced tariffs.
A slowdown in demand due to disruptions in businesses and transport by the Coronavirus pandemic further hit KPC’s revenue from throughput.
KPC remained cagey on the impact that the new tariffs will have on Kenya’s efforts to price away nations that are increasingly turning to Tanzania for transportation of refined fuel from the ports.
Besides constructing a new line, KPC is also eyeing a berth for the handling of Liquefied Petroleum Gas at the recently commissioned Kipevu Oil Terminal.
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Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.