Lack of Funds Could Stall Plans for National Petroleum Reserve

Joseph Bonyo

20 May 2011

Nairobi — Plans for a national petroleum strategic reserve may flounder because there is no money.

Energy minister Kiraitu Murungi says the Treasury has never allocated money for the reserve, almost five years since the idea was mooted.

“The Treasury has other priorities competing for the resources,” the minister said at a stakeholders’ forum on Friday.

Plans to establish a strategic reserve were gazetted by Mr Murungi in 2008, following the post-election violence.

The cost of putting up the reserve has since escalated due to global economic dynamics. The ministry of Energy estimates it would cost Sh84 billion to buy reserves for 90-days.

An additional Sh40 billion is estimated for storage. Although plans of a public private partnership have been mooted, this has not received any support so far.

The minister was speaking at a meeting between government, oil marketing firms and consumers to seek solutions to the fuel woes.

The one-day meeting is also expected to come up with practical solutions to the inefficiencies bedevilling the petroleum sector.

Admission by the minister came soon after National Oil Corporation of Kenya invited bids for consultancy on the reserve. The tender notice in some daily newspapers, is aimed at conducting a feasibility study on the plans.

The consultant will be expected to invest in infrastructure for holding the strategic stocks and also to ease the constraints in the petroleum distribution infrastructure, the notice read in part.

The lack of a strategic reserve has been largely blamed for the perennial shortages in Kenya.

This has also led to the high pump prices in the country, since no stock procured at cheaper prices are stored for future use.

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