Ten oil CEOs face jail and fines in fuel crisis probe

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Ten oil CEOs face jail and fines in fuel crisis probe


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Ministry of Energy Cabinet Secretary Amb. Dr. Monica Juma (second left) flanked by other officials in the energy sector during a media briefing on April 14, 2022. PHOTO | DIANA NGILA | NMG

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Summary

  • Their firms have been blamed for breaching a regulation that demands they keep a minimum level of diesel and petrol stocks, causing the countrywide fuel shortage.
  • Oil marketers are under the law required to maintain minimum stocks of petrol and diesel to last 20 days and 25 days respectively to cushion the country from supply disruptions.
  • Government officials blame the shortage on oil marketing companies, accusing them of breaking the rules on minimum stocks and hoarding supplies ahead of Thursday’s monthly price review.

Ten CEOs of oil marketers risk two years in jail or fines of up to Sh2 million for the firms’ role in the current diesel and petrol shortage crisis.

Their firms have been blamed for breaching a regulation that demands they keep a minimum level of diesel and petrol stocks, causing the countrywide fuel shortage.

Oil marketers are under the law required to maintain minimum stocks of petrol and diesel to last 20 days and 25 days respectively to cushion the country from supply disruptions.

Government officials blame the shortage on oil marketing companies, accusing them of breaking the rules on minimum stocks and hoarding supplies ahead of Thursday’s monthly price review, which saw pump prices increase by Sh9.90 per liter from midnight.

The State has termed their actions economic sabotage, which is a capital offense that carries life imprisonment.

The fines and jail term linked to stocks are contained in the Energy (Minimum Operational Stock) Regulations, 2008 and underline the government’s resolve to end the fuel shortage that has persisted for three weeks.

The executives of the 10 firms, including top marketers Vivo Energy, Total Energies, Ola Energy, and Gapco Hass Petroleum, are this morning expected to report to the Directorate of Criminal Investigations (DCI) on the economic sabotage claim.

Other managers on the radar of the DCI are Petro Oil, Galana Oil and Lake Oil Petroleum.

This came amid conflicting reports over the deportation of Rubis Energy Kenya CEO, Jean-Christian Bergeron, due to the fuel crisis.

Rubis in a statement last evening appeared to contradict the State on claims of having deported Mr Bergeron to France, saying the CEO traveled to Paris to brief the head office over Kenya’s fuel crisis.

Rubis Energy Kenya is owned by Rubis Energie, a subsidiary of the Rubis Group which is listed on the Paris Stock Exchange.

Energy Cabinet Secretary Monica Juma earlier in the day told a media briefing that Mr Bergeron had left the country on Wednesday night but declined to give further details.

“These (artificial shortages) are not acceptable and will not be tolerated. We cannot hold the nation at ransom. We will go the whole hog to bring all persons and companies who are in breach of their licensing and operating guidelines to book, ”Dr Juma said on Thursday.

Dr Juma added that the oil marketers committed economic sabotage and threatened the nation’s security by hoarding the fuel.

Frustrated motorists have been making long queues at filling stations for days due to the biting shortages.

Oil companies have pointed to subsidy arrears owed to them by the State for the shortage. The subsidy was introduced last April to stabilize prices amid suspicion of hoarding.

Delays in the payment of subsidies to the companies by the government have pushed up prices in the wholesale market where oil majors resell fuel to the smaller independent fuel retailers, who control 40 percent of the market.

This has seen the small retailers hesitate to buy the costly fuel, with increased supply of oil majors unable to plug the deficit.

The oil majors were also cautious about increasing supply, uncertain about whether the State would compensate them for fuel not used to calculate Thursday’s monthly price adjustments, which will stay in place for one month.

The marketers are said to have increased the share of fuel they sell to the neighboring countries of Uganda, Rwanda and DR Congo to over 60 percent from the previous 40 percent of total imports to ease their cash crunch.

This has further cut supply as the neighboring countries enjoy normalcy.

Dr Juma on Thursday threatened to reduce import quotas for oil companies that fail to sell their full allocation as the country grapples with a biting fuel shortage.

The minister said she had sanctioned a process of reallocating the petroleum import capacity and expected the fuel crisis to ease within 72 hours.

“This situation can only be equated to deliberate efforts to sabotage this economy, which constitutes a capital crime,” she said.

“The oil marketing companies who sold above their normal local quota during the crisis period will benefit from additional capacity; while those who sold less will have their respective capacities reduced. ”

Rubis Energy Kenya said in its statement denied increasing its export sales to the detriment of the Kenyan market.

The government also warned that oil marketers that were disgruntled with the current fuel stabilization scheme should exit the Kenyan market instead of creating artificial shortages.

Kenya has since April last year been compensating marketers in a bid to keep pump prices low in the wake of the global rally in crude prices.

But the global rally in crude prices following Russia’s invasion of Ukraine has put the subsidy scheme to test.

Oil prices soared after Russia invaded Ukraine, with the price of Brent crude oil – the global benchmark for prices – hitting a near 14-year high of $ 139 per barrel at one point.

The prices have eased to under $ 100 a barrel in the past three weeks after the United Arab Emirates and the Houthi militant group announced a truce to halt military operations on the Saudi-Yemeni border, alleviating fears of supply disruptions.

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