Lack of storage facilities could soon expose East African region to shortage of oil in the wake of an increase in demand.

Kenya’s demand for petrol is growing annually at 16 per cent and could cause shortages in Uganda, Rwanda, Democratic Republic of Congo and South Sudan, which depend on transit facilities in Kenya for supplies.

Kenyan consumers at any time are five days away from stockouts of petrol due to limited capacity. Although the Kenya Pipeline Company (KPC) has acquired a private depot from VVTI to address the problem, marketers are yet to start using it because a deal on tariffs has not been hammered out.

The Energy Regulatory Commission (ERC) said inadequate storage capacity for petrol is a hindrance to steady growing demand. The country depends on processed oil after Kenya Petroleum Refineries Ltd (KPRL) shut down in September 2013.

KPC last year handled 1.754 billion litres of petrol, of which 1 billion litres were for domestic use and the balance for export. In 2013, it handled 1.59 billion litres of petrol, out of which 894,000 litres were for local use.

“There has been a consistent of growth of demand for in the country of about 16 per cent per year. The tankage has roughlyfairly the same,” said ERC’s director general Joseph Ng’ang’a.

He said discussions are underway for the Ministry of Energy to grant KPRL permission to receive imported petrol and KPC to start leasing private depots.

KPC’s 10-year strategic plan entails enhancing capacity of pipeline system, expanding existing infrastructure and capitalising on emerging opportunities to serve the region.

ERC’s director of petroleum p Linus Gitonga said in future, investors will be invited to build storage facilities at strategic sites.

“The depots are to be built under a public private partnership framework and investors will make a return on investment by charging marketers using the facilities a fee based on the tariff approved by ERC,” he said.

Projects being undertaken by KPC include building a 450 kilometre 20-inch pipeline from Mombasa to Nairobi at a cost of $490.3 million to replace the 14 inch facility pumping 830 cubic metres of fuel, which was commissioned in 1978.

The new pipeline is expected to pump up to 1,800 cubic metres of fuel per hour enough to meet the region’s needs. Four storage tanks valued at $52 million are being built in Nairobi to keep higher volumes of oil products.

The four tanks will store 133.52 million litres of fuel. the Nairobi terminal with capacity of 100,528 cubic metres is the second largest depot of KPC after KOSF in Mombasa that holds 326,333 cubic metres of products.

New pipeline

KPC’s managing director Charles Tanui said the firm is set to start building a 10-inch 122 kilometre pipeline from Sinendet to Kisumu to deliver additional 360,000 litres per hour of oil products to western Kenya.

Mr Tanui said KPC has embarked on upgrading facilities to meet new demand and that construction of a modern bottom truck-loading facility is currently underway in Eldoret.

“The Sinendet-Kisumu pipeline and the new Eldoret truck-loading facility are a twin approach by KPC to cater for the rising demand for petroleum products not only in western Kenya but also in the region,” he said.

KPC is currently in talks with private investors with a view to acquiring their facilities in Mombasa and Nairobi to act as additional storage and truck-loading facilities.

“KPC is in discussion with PetroCity to acquire their depot in Konza, which will enable us to increase our capacity by 38 million litres and an additional turnaround of over 100 million litres a month,” said Mr Tanui.

Petrocity’s depot at Konza on the Mombasa-Nairobi highway has a storage capacity of 22.5 million litres of diesel, 13 million litres of petrol and 4 million litres of kerosene with truck loading facilities.

KPC in 2014 leased for five years a 110 million litre depot owned by VTTI Kenya Ltd in Mombasa that is connected to the Nairobi refined fuel pipeline to reduce pressure on KOSF by offering alternative storage for imports.

VTTI Kenya, which is 50 per cent owned by Vitol Group, in September 2012 finished building of a $60 million depot when construction of 10 tanks was completed.