The Kenya Pipeline Company (KPC) is in the process of selling the stocks of 11 oil marketing companies (OMCs) to recover a Sh2.15 billion debt.
The State-owned firm says it has picked 11 lawyers to sell the petroleum stocks sitting in its distribution pipeline as ‘line fill’-- a jargon used in the oil and gas industry to refer to the minimum volume of product required to be maintained in a pipeline for its efficient and safe operation.
The Sh2.15 billion debt has remained unpaid for over six months and is part of a Sh10.07 billion credit that was outstanding as at the end of June 2024.
KPC said that it decided to auction the products after other measures, including payment reminders and suspension of services, failed to yield results.
“Although a provision was made in the financial statements for long outstanding receivables, Transportation Service Agreements (TSAs) with OMCs provide that after 45 days and upon notice to an OMC, KPC shall be at liberty to sell all such products and apply the proceeds of such sale in or towards the satisfaction of such lien and all proper charges and expenses in relation thereto,” said KPC in its latest annual report.
KPC told Business Daily in an emailed response that the 11 OMCs are not actively trading but it cannot disclose their names due to contractual non-disclosure obligations.
The company said that under the TSA, the line fill is held as a security for the storage and transportation services provided by KPC.
“Oil marketers using the pipeline infrastructure sign the agreement which stipulates actions KPC takes in case of breach of contract. [Those without the line fill] cannot access the pipeline services,” said KPC in an emailed response.
KPC also disclosed in the annual report that part of the Sh10.07 billion outstanding amount included Sh5.54 billion attributable to Kenol-Kobil, the precursor to Rubis Energy. According to KPC, the amount was subject to a legal dispute, which has since been settled.
In the year to June 2024, KPC’s net profit after tax reached Sh6.87 billion, up 52.6 percent from Sh4.49 billion in the previous financial year.
The latest profit was the highest in four years. In 2020, the pipeline company posted a net profit of Sh8.18 billion.
The company owns a pipeline network, storage and loading facilities for the transportation, storage and distribution of petroleum products. The currently installed system consists of 1,342 kilometres of pipeline with a current capacity of about 14 billion litres of petroleum products.
During the period under review, revenue increased by 14.6 percent to Sh35.37 billion from Sh30.86 billion, while administrative expenses fell from Sh11.85 billion to take operating profit to Sh11.8 billion.
KPC paid Sh7 billion in dividends to the Treasury out of a pre-tax profit of Sh10.05 billion, up from Sh5 billion in the previous year.
