Petroleum fuels constitute the main source of commercial energy in Kenya. Kenya is a net importer of petroleum products and has a refinery owned and managed by the Kenya Petroleum Refineries Ltd (KPRL), an 800 km cross country oil pipeline from Mombasa to Nairobi and Western Kenya with terminals in Nairobi, Nakuru, Eldoret and Kisumu, run by the Kenya Pipeline Company (KPC). The sector also boasts of over 30 oil importing and marketing companies comprising of five major companies namely Shell, Total, Kenol/Kobil, Oil Libya, Chevron, and other emerging oil companies which include the Government owned National Oil Corporation of Kenya (NOCK).
The sector, which was liberalized in 1994, has since seen a lot of growth and improvements in quality and level of service. However, without an appropriate regulatory environment being in place at the time of liberalization (the existing legislation at the time was the Petroleum Act Cap 116 of 1948 with latest revision of 1972), several challenges face the sector which include proliferation of substandard petroleum dispensing and storage sites which pose environment health and safety risks; diversion of petroleum products destined for export into the local market by unscrupulous business people to evade tax and a dominance of the market by a few companies among others. The Government noted these challenges in its energy policy contained in Session Paper No. 4 of 2004 on Energy and recommended review of the Petroleum Act Cap 116 and other energy sector statutes and the introduction of a new energy sector legislation to cover petroleum, electricity and renewable energy. It also recommended the formation of a single energy sector regulator to regulate electricity, downstream petroleum, renewable energy and other forms of energy.
In 2006, the Energy Act No. 12 of 2006 was enacted. This led to the transformation of the then Electricity Regulatory Board to the Energy Regulatory Commission (ERC) to also regulate petroleum and renewable energy sectors in addition to electricity. The Act states in Section 5(a) (ii) that the objects and functions of ERC include regulating the importation, exportation, transportation, refining, storage and sale of petroleum and petroleum products. Therefore one of the functions of the ERC is licensing of petroleum import, export, transport, storage, refining and sale. Construction Permits are also to be issued by ERC for all petroleum related facilities in order to check proliferation of substandard sites. All petroleum operators are required to comply with provisions for Environment Health and Safety. Petroleum products should also meet the relevant Kenya Standards.
Section 102 empowers the Minister to make regulations upon recommendation by the Commission on petroleum related activities including importation, exportation, and landing, open tender systems for importation, minimum operational stocks, and determination of retail prices for petroleum products among others. Regulations which were developed under the repealed Petroleum Act Cap 116 are deemed to be in force until repealed or revoked under the provisions of the Energy Act No. 12 of 2006.
Functions of the Petroleum Department:
- Review of government policy on petroleum;
- Governing the petroleum sector with focus on licensing, issuing of construction permits, developing standards for bulk petroleum transportation and petroleum costs and prices monitoring;
- Take the lead in the formulation, review and enforcement of rules, regulations and codes for the petroleum sector;
- Identifying gaps in EHS and developing interventions to address the gaps to ensure that EHS clearly understands standards and rules that it is expected to regulate. This will include the review and enhancement of existing standards.