WASTING AWAY

Idle Kisumu Oil Jetty loses Sh11m every year

Management flagged for conflict of interest in key decisions at the oil pipeline company

In Summary

•Dangers cited in the face of risk of the Ugandan company running out of business or straining its relations with the country's government.

•MPs at PIC say case of jetty compounded in deeply rooted challenges posed by conflict of interest in KPC operations 

Billy Aseka of Kenya Pipeline Company (right) demonstrates to the KPC managing director Joe Sang’ on how the pipes will transport oil during a tour at the KPC yard in Changamwe, Mombasa.
Billy Aseka of Kenya Pipeline Company (right) demonstrates to the KPC managing director Joe Sang’ on how the pipes will transport oil during a tour at the KPC yard in Changamwe, Mombasa.
Image: JOHN CHESOLI

Kenyans are at the risk of losing more money in the Sh1.9 billion Kisumu Oil Jetty project amid revelations that the facility is wasting away for non-usage.

This is in the face of a report by the Auditor General revealing that the oil transportation system depreciated by Sh11 million in the Financial Year 2017/18 - a rate of 0.57 per cent.

MPs at the Public Investments Committee faulted the Kenya Pipeline Company for initiating the project when they were not sure of the Ugandan commitment towards the same.

 

The neighbouring country was to construct a complementary facility but the same has been shrouded in uncertainty over its completion dates.

The committee, chaired by Mvita MP Abdullswamad Nassir, on Thursday flagged the dangers of the Kenyan facility being a waste of investment owing to the “weak link with the Ugandan side”.

They cited dangers in the face of the Ugandan company running out of business or straining its relations with the Ugandan government.

“This is not a small investment since the company has already spent Sh1.9 billion. If the company in Uganda runs out of business, what happens to the facility? Was due diligence done before the works commenced?” he asked.

MPs Gladys Wanga (Homa Bay), Chris Wamalwa (Kiminini), Joash Nyamoko (Mugirango North), Zachary Thuku (Kinangop), and Mandera East’s Hassan Omar also pressed for answers.

KPC acting Managing Director Hudson Andambi told the lawmakers that they estimated that the jetty would be completed concurrently with Uganda.

However, the committee was told that the works, as per a visit in December last year, was at five per cent and the completion date was reviewed to last month. The works remain outstanding.

 

“KPC is looking at OMC to leverage on the facility to increase our throughput for the products to be available,” Andambi said.

A number of former KPC directors are in court on charges of corruption and abuse of office in the procurement of the Oil Jetty tender.

Lawmakers held that the major trouble with KPC contracts lies in the deep levels of conflict of interest in the pipeline company’s management and board of directors.

In focus is the case where the company is owed by Kenol/Kobil Sh4.3 billion in respect of services rendered to the OMC which also wants KPC to pay it Sh1.9 billion.

The money was awarded by an arbitrator after it contested the KPC debt claim and instead said it was the one owed after the government increased some tariffs to three US dollars.

Auditors queried why the debt was being lined up for write off on grounds it has taken 10 years to resolve the row between the oil company and the pipeline.

However, it has emerged that the law firm that is representing Kenol/Kobil is linked to KPC finance committee chair, the team which approved the write off.

Andambi said the figure as accounted for is not being netted off and that whatever the company is claiming is a debt and is outstanding in the company’s accounts.

“Because the amount has taken ten years, we are providing for a doubtful debt, being one that is past the six months of our policy. We don’t write off,” the company boss said.

He added: “Jenaro Kibet is a director at KPC but joined when the matter was already ongoing. He declared his interest and excused himself when the decision on the debt was being made.”

Even so, lawmakers further pointed out conflict on the part of a board member Millicent Wanyonyi – committee learned she resigned this year.

“Are you aware she was a director at a company you are in court with over billions of shillings? Other board members have conflict issues which were picked by the OAG,” Nassir said.

“Why you provide for bad debts is for it to be written off? Was it because it was approved by the Board Finance committee?” the MP asked.

Wanga sought for confirmation on whether the director had declared his interest before the date of discussion of the audit report on the Kenol/Kobil matter.