Industry Overview

The Oil Industry as we all know is one of the key revenue earners for the country. We applaud the decision that was taken by the government in 1994 to deregulate the industry.

The main objective of the deregulation was to enhance competition and benefit the consumer. Deregulation has not necessarily benefited the consumer due to industry constraints that I will touch on.

We recommend the keen interest with which the Ministry of Energy has been following the happenings in the industry and the interventions we have enjoyed so far when we raise concerns on unfair practices for the benefits of the consumer. We are optimistic that the government will continue to provide a fair playing ground for all players in the industry in the interest of stakeholders.

Company Overview

Dalbit Petroleum Limited joined the industry in March 2002. We have successfully established ourselves in the market and look forward to participating and assisting in Kenya’s economic recovery.

Some challeges met by new entrants:-

(i) The current logistics of acquisition of crude oil, the cost of processing and the drawing back of such products has been one of the key barriers to new entrants. The major oil companies monopolize the supply of crude oil and as such the minors have no choice but to purchase the crude from them. This is obviously at a premium.

(ii) Secondly, the major oil companies control all loading facilities in Mombasa resulting in the minors to being penalized once again by having to use these facilities at a premium

Minors have had to deal with is the false perception by most consumers that they adulterate petroleum products. This is largely due to ignorance of the fact that all oil companies, (Majors and Minors alike) draw products from the same source, the Kenya Pipe Line. Any ensuing adulteration is done by third parties we do not control

Our recommendations to the Government

The completion of the tendering legislation will enable all players to procure the crude as equals in the international oil markets and the cost savings will result in reduced prices to the consumers.

2. Loading Facilities For Fuel Oil And LPG

Due to the heavy capital investment for independent loading facilities, the Government can assist the minors by investing in loading facilities in Mombasa, as is the case in Nakuru, Kisumu and Eldoret where KPC loading arms are open to all oil companies. This would result in an even playing field, more competition, and hence lower prices to consumers. This is the case in Western Kenya where retail prices are lower than in Nairobi.

Opening up of similar facilities for LPG would reduce the cost of supplying the same to the consumers, which would, in turn, encourage wider usage of Gas for domestic use and hence reduce environmental damage by limiting use of charcoal and firewood. This would go a long way in the preservation of our forests and water catchment areas.

3. Kenya Railways

We would propose a railway maintenance levy from the oil companies to assist in the restoration of the Railways. This would benefit our road network by reducing traffic and over loading.

An improved railway system would increase trade within the East Africa region resulting in job preservation and increased government revenue.

4. Protection Of The Environment

In order to halt the chronic deforestation being experienced in the country (Kenya has only 1.7% forest cover and a country requires a minimum of 10% to be able to sustain its environment) Dalbit would like to see duty on Kerosene drastically reduced in order to encourage its use instead of charcoal.

5. Kenya Pipeline Corporation

Issuance of stock certificates for line fill would free up capital, which is currently ‘dead stock’. The issuance of these certificates would not cost the government money and would therefore not pose any financial constraint to the exchequer.

Retail Outlets

Although Dalbit has no immediate plans to venture into the retail business, we feel that the Government would facilitate healthy and fair retail competition by standardizing health, Safety and environmental standards through legislation.

Competition at the retail level will benefit the consumers with the resultant price reductions. This has been the case in Western Kenya where due to a large retail competition presence enabled by the available KPC loading facilities, the retail prices of petroleum products are much lower than in Nairobi and Mombasa.

Our Contribution to the Exchequer

This Company has over the last twelve months turned over approximately Kshs. 2.5 billion and paid approximately Kshs. 1.2 billion to the exchequer. The government can safeguard its revenue collection for the industry by controlling imports through Kipevu oil terminal. This would require investment in pipe works to private oil storage facilities.

Looking to the Future

The Company is financing a feasibility study to produce ‘wind energy’ through a sister Company Ecogen. Ecogen intends to harness wind energy to provide eco friendly power for the future. This has been successfully done in various countries, for example, Germany, Denmark and South Africa.

MR. HUMPHREY K. NDEGWA
Chief Executive
Dalbit Petroleum Limited

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