Inefficient port operations costing taxpayer avoidable demurrage charges

Inordinate delays in the processing of shipping vessels have been cited as a major contributor to spiralling fuel costs, with the taxpayer footing hefty bills because of operational inefficiencies resulting from breach of demurrage agreements.

With the existing charter imposing a $45,000 daily rate for vessels not cleared within the agreed timeline of 48 hours, Kenya Pipeline Company spends an estimated Sh110 million monthly to clear demurrage charges for delayed vessels.

The Energy Petroleum Regulatory Authority (EPRA) told the National Assembly Committee on Finance that operational inefficiencies by the Kenya Ports Authority (KPA) and the Kenya Pipeline Company (KPC) had in recent months derailed the offloading of fuel at the port of Mombasa.

“There is an opportunity to do better but as of now we have operational challenges in relations to KPA and KPC. If you are going to discharge fuel into the system you are just bound to create space,” said Kiptoo.

Poor infrastructure at the Kipevu Oil Terminal (KOT) was also cited as a cause for the delays in discharging shipping vessels. The Kipevu terminal, built in 1963, lacks capacity to meet East Africa’s demand for oil products estimated at 450 million litres a month. KOT handles over 90 percent of the country’s imports, some are transit products for Uganda, Northern Tanzania, Rwanda, Burundi, Eastern DRC and South Sudan.

The explanation by EPRA on the cause of delays at the dock by oil shipping vessels was however turned down by lawmakers who termed the answers unsatisfactory.

Open tendering system for importers of fuel was also cited as one of the reasons for high demurrage charges which the legislators termed as man-made. Lawmakers questioned why the Ministry of Petroleum granted seven shipping companies access to the port to supply fuel, aware of the capacity challenges at the oil terminal.

Kitui Rural MP David Mwalika accused the petroleum ministry of running a skewed tendering process which allows importers to collude with the KPC officials to delay at the jetty so as to swindle the taxpayers in form of demurrage charges.

“There is corruption in this tendering system. We are told only seven shipping vessels discharge in a month. What is the point of having the seven and the oil jetty cannot accommodate all of them? The Ministry is only occasioning delay so that charges are incurred,” stated Mwalika.

For more information visit www.epra.go.ke

18th October 2021