Kenya Pipeline Company; what’s happening there?

Very promising initial discoveries in Kenya indicates a large windfall for companies and government alike. Much of East Africa’s potential oil production appears to be located in landlocked countries making the regions nascent oil industry partly dependent upon finding a viable cross-border export route. The ability of the oil companies to come up with complex web of security, geological and infrastructural issues determine the ultimate success.

The discovery of oil in Kenya earlier last year adds more import regional-political dynamics into the mix. It’s a positive indication for the country and neighboring Ethiopia which shares the Turkana rift basin. Kenya has more efficient and well developed business sector, more advanced infrastructure and sea access. This may prime to exploit the regions oil boom weakening Ugandans’ hopes of regional dominance.

Though one would expect Pipeline with revenues of over KES 7 billion, making it one of the biggest firms in Kenya to be managed professionally, it’s deeply wounded with a nasty political problem. At the current level of profitability, the company had an increase in net margin on sales with virtually no major capital expenditure and increased focus on debt collection, Kenya Pipeline Company (KPC)’s cash flow increased. Still, even with this kind of performance, Pipeline still faces other challenges. Then the company will be expected to invest heavily in expanding capacity to pump more fuel locally and to the regional countries, which rely heavily on Kenya for oil. Increased economic growth in Kenya is already bringing more demand for oil. What puzzles many is what exactly is happening at the Kenya Pipeline Company (KPC)?

The challenges facing oil and gas companies operating in Kenya and Africa at large are diverse and numerous: For example, Shell reports that criminal gangs are targeting, damaging and bunkering. Also with the security situation of regrouping of the Somalia-based al-Shabaab militant group and an uptick of the group’s apparent attacks in Kenya continue to be problematic, even more so because no one seems to be sure whether the threat is emanating entirely from the al-shaabab.  This always incurs losses, and the investors/clients are compensated for these kinds of loss. What could be the right compensation procedure for the losses incurred?     

It was eventually discovered that procurement of parts at Pipeline sometime back was controlled by a cartel of eight Asian firms, working in cahoots with some of its engineers resulting in situations where parts that would have ordinarily cost Pipeline less cost more billions. With the corporation facing such a huge challenge, what could be the right authority to deal with the cartels?

Customer, employee and the public satisfaction are tracked, the formal process of making budgets and performance changes. Petty contracts which scoop a huge amount of money from the returns of the company are dis-heartening. Is the KPC able to give the public the exact figures when it comes to compensating people every day on the losses incurred?

Considering this to be an election year, how transparent will the corporation be in regards to fuels storage and supply? This has to be put into consideration putting in mind the transformations put in place by the government.

Related: Trouble at Nzoia Sugar Company

Written by Amina Martha.