Oil dealers now prefer Dar es Salaam to Mombasa port

The $60 tariff per 1,000 litres on transported fuel through Kenya Pipeline is costing Kenya revenue as landlocked countries turn to Tanzania’s Central Corridor.

The value of Kenyan petroleum exports have dropped 43 per cent from Ksh2.1 billion ($21 million) in the first six months of 2018 to Ksh1.2 billion ($12 million) in the first half of the year.

Balance of payment data by the Kenya National Bureau of Statistics shows the exports are also lower than the Ksh2.4 billion ($24 million) export of petroleum products in 2017.

Oil marketers says they pay on average of $80 to ferry oil from Dar es Salaam using trucks but pay $60 tariff when using the pipeline to Kisumu and a further $35 on trucks to buying countries. Tanzania has also upped its game by increasing efficiencies at the port.

“We have been telling the government that $60 tariff is too high. Sometime for marketers it even makes more sense to send trucks to Mombasa which we do and save around $20 because for us margins make a lot of sense,” an oil marketer who spoke on condition of anonymity said.

Kenya Pipeline chairman John Ngumi said the tariff was under review by Energy and Petroleum Regulatory Authority (EPRA).

“They are aware we are in the process of a review and if it is an issue it will be reduced if there are other issue of efficiencies we will also look into that,” Mr Ngumi said.

In 2017, KPC gave a 30 per cent promotional discount that cut the rates to $41 but Mr Ngumi said this did not drive up volumes as expected.

“The promotional tariff was given to increase traffic but that did not happen. We also had challenges since Line 5 was not ready and now it is ready, and we are able to accommodate incremental throughput,” he said.

For a long time, the Northern Corridor through Mombasa has been the preferred route for Uganda, Rwanda, Congo and South Sudan due to port efficiencies, and a pipeline to Eldoret and Kisumu from where the petroleum products are trucked to the landlocked countries.

The port of Dar es Salaam has now improved goods are loaded directly to private terminals where marketers truck to transporters.

Concerns

George Wachira, director of Petroleum Focus Consultants, said there has been concerns over the past few months that Uganda is considering to use the Dar es Salaam port instead of Mombasa. He says the shifts are usually driven by prices.

“The two keep on changing as prices at Mombasa and Dar es Salaam change,” he said.

Oil passes through Kenya either as transit for foreign financed product or as exports where Kenyan companies finance the product. There has been concerns that Kenyan fuel is adulterated, prompting EPRA to conduct sting operations in 955 petroleum sites between July and September.

However, since the government introduced the anti-adulteration levy and pumped up the prices for kerosene, rogue players lack incentives to mix fuel products.

“All sample sites were found to be compliant. These results are a significant milestone in the fight against adulteration and dumping in Kenya,” EPRA said.

KPC relies on tariffs to raise money to service massive debt procured to finance infrastructure investments, including the new Mombasa-Nairobi pipeline constructed at a cost of $473.4 million, and the four new oil storage tanks in Nairobi that cost $50 million.

The company has also invested $16 million in the Kisumu Oil Jetty, which currently lies idle due to delays by Uganda in completing its own jetty to receive, provide storage and ease the transportation of oil between the two countries.