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Over Half Of Vendors In Kenyan Oil Import Market Allegedly Operating Illegally

Seventy oil companies are operating outside the law in Kenya, according to the state-run Kenya Pipeline Company (KPC), which is contradicting claims by the Energy Regulatory Commission (ERC) that all players are properly licensed under federal guidelines.

The KPC made the accusation involving over half of the oil firms that are active in the country by sending each violator company a letter describing the scope of their transgression.

We note that you have failed to obtain and /or renew your license that allows you to conduct business of importation and transportation/storage of petroleum and storage of petroleum and petroleum products,” the letter, signed by KPC managing director Joe Sang, reads. “We hereby issue you with a ninety-day notice to ensure compliance failure to which we shall take the necessary steps in accordance with Transportation and Storage Agreement (TSA) without further reference to you.”

The Kenyan government operates an open tender system to facilitate the purchase of refined oil goods on a monthly basis. To participate in selling in this market, all vendors must be licensed by the government, and must meet minimum line-fill requirements similar to capital requirements for banks.

Two of Nairobi’s preferred oil companies, KenolKobil and Total Kenya, received the letters, but the ERC denies that any of the firms trading on the tender system are doing so illegally because the list of active companies are updated so often. KenolKobil, which currently leads in sales in the African country, has spoken with the KPC regarding the situation.

Related: Four Charts That Explain OPEC’s Fall From Power

On a monthly basis, the ERC advises the Ministry of Energy and KPC of the validly licensed oil marketing companies and this is what is used for ullage/capacity sharing and import planning. It, therefore, means that an oil marketing company without a valid license is automatically locked out of the system and cannot trade,” Pavel Oimeke, acting ERC director-general said.

It remains unclear what the consequences of the violation could be, but the nation’s key regulator continues to deny the allegations.

By Zainab Calcuttawala for Oilprice.com

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