State-owned Nock to import a third of Kenya's oil products

National Oil Corporation of Kenya (Nock) could be handed a lifeline after the Petroleum ministry proposed that the company import nearly a third of all petroleum products consumed in the country.

In draft regulations, the loss-making State-owned marketer will be allowed to import 30 per cent of the refined petroleum products.

The Draft Petroleum (Importation) ( Quota Allocation) Regulations, 2022 give Nock a 30 per cent petroleum products quota for diesel, super petrol, kerosene and cooking gas.

“The petroleum products quota allocation shall be imported by Nock,” said the Petroleum ministry in a gazette notice. The proposal also requires Nock to give priority to independent oil marketers, mostly small and medium-sized firms that do not have affiliation with oil majors, when discharging products.

The smaller operators have in the past accused the major brands of unfairness by offering them products at unreasonably high wholesale prices that leave them with little margins at the pump.

“Priority to purchase petroleum products from the quota holder shall be given to retail stations operated or franchised by the quota holder and operators of independent petroleum retail stations,” said the ministry.

“The Kenya Pipeline Company shall allocate up to a maximum of 30 per cent of its total storage capacity for the purpose of petroleum products quota allocation.”

The notice, however, said Nock could lose the import quota if it does not make use of it within two years. “A quota holder that has failed to import its full allocation in two consecutive years shall forfeit the unused portion to the Open Tender System (OTS) until the Cabinet secretary advises otherwise,” it said.

The unused monthly quota will be reallocated through the OTS - the system that the local oil industry uses to import petroleum products by contracting the oil marketer with the lowest bid.

Nock had in the past been allocated a similar importation quota for diesel, which the State had hoped would help stabilise the product’s prices in the market.

This was in line with one of the core mandates of the oil marketer to stabilise retail prices of petroleum products. It was expected that Nock, being State-run, would work with other national oil companies from oil-producing countries to source for products directly and, therefore, at relatively cheaper rates.

It was in turn expected to sell petroleum at lower rates to both retail and wholesale consumers, thus keeping pump prices low. This, however, did not work out due to different factors, including a shortage of funds to procure large consignments of fuel.