(i) History of Petroleum Regulation in Kenya
The Petroleum Act CAP 116 was enacted in 1948 (with a major revision in 1972) and was the major law governing the petroleum sub-sector until 2006. The petroleum sub-sector was highly regulated with price controls for the main products. When the sector was liberalized in 1994, various challenges were experienced such as proliferation of substandard petroleum facilities and products. To address the challenge, Sessional Paper No. 4 of 2004 set pace for a new law to regulate petroleum sector, hence the Energy Act No. 12 which was enacted in 2006.
(ii) Current Regulation of the Petroleum Sector
Following the enactment of the Energy Act No. 12 of 2006, the Electricity Regulatory Board was transformed to the Energy Regulatory Commission (ERC). Consequently, the ERC was mandated to regulate Petroleum, Renewable energy and Electricity subsectors. Additionally, Section 5 (a) (ii) gives the Commission mandate to regulate importation, exportation, refining, storage, transportation and sale of petroleum and petroleum products.Section 80(1) requires persons dealing in importation, exportation, refining, storage, transportation and sale of petroleum and petroleum products to obtain a licence from the Commission.Section 90 requires a person wishing to put up a storage facility, refinery, pipeline or a retail station to obtain a construction permit from the Commission.
Petroleum supply chain is supported by the following critical infrastructure:
(i) Petroleum Receipt and backloading jetties:
- Kipevu Oil Jetty (KOT): This is located at Kipevu area, Mombasa County and handles large petroleum vessels. Product is then transferred to the government owned Kipevu Oil Storage Facility (KOSF).
- Shimanzi Oil Terminal (SOT): This is used for importation of petroleum by small vessels.
- Mbaraki: This is a privately owned facility.
- Africa Gas & Oil Limited (AGOL): This is a dedicated LPG facility built under concessionary terms from the Kenya Ports Authority. It is connected to a common user manifold. The only storage depot connected to it is the AGOL mainland facility.
- Kisumu Oil Jetty: This is located on the shores of Lake Victoria and is used for the exportation of petroleum products to the countries bordering the lake and into the Eastern DRC and South Sudan.
(ii) Petroleum storage tanks: Kenya’s total storage capacity is over 1,500,000,000 litres spread out across the country. Over 700,000,000 litres of this is operated by the Kenya Pipeline Company as primary and intermediate storage.
(iii) Petroleum pipelines: The pipeline system consists of trunk lines and distribution lines from Mombasa running through Nairobi to the Western Kenya towns of Nakuru, Eldoret and Kisumu totaling to about 1,804km.
(iv) Retail networks: Kenya has over 1,800 retail stations. Stations are classified as Tier 1, 2, 3 and 4 depending on land area, services offered and storage capacity.
Petroleum licensees are classified into the following categories:
(i) Importers of Petroleum Products (115)
(ii) Storage depots (26)
(iii) LPG Storage and Filling Plants (64)
(iv) Pipeline transportation (1)
(v) Refineries (1)
(vi) Wholesalers and Exporters (540)
(vii) Transporters (by road for LPG and normal grade fuels) (100)
(viii) Retailers (1,800)
(ix) Petroleum Tankers (640)
(x) Petroleum Drivers (600)
Some of the companies operate in almost all the above licensable activities. Observance of fair competition is regulated in liaison with the Competition Authority of Kenya.