Kenya’s energy regulator is considering cancelling the trading licences of nine oil marketers over failure to lift refined fuel from the Mombasa refinery, worsening the troubled facility’s financial crunch.

The Ministry of Energy, in a fresh purge of defaulters, has instructed the Energy Regulatory Commission (ERC) to take action against the firms which owe Kenya Petroleum Refineries Ltd (KPRL) money or have defaulted in taking their allocation of fuel as required by law.

The refinery is facing cashflow problems caused by the failure of companies to lift products and settle outstanding debts for fuel already received. Debts owed to KPRL in August this year rose to over Ksh2 billion ($22.9 million).

READ: Cash-strapped Kenya refinery now owed $22m

The nine firms likely to be affected by the directive are Astrol Petroleum, Cape Suppliers, Fast Energy, Topaz Petroleum, Intoil, Tradiverse Kenya, Falcon Oil, Trojan and Tiba.

The region’s biggest marketer KenolKobil, which also owes the refinery money, has however been exempted from this directive as it has entered into an agreement with KPRL on how to repay its debts. KenolKobil had in June been suspended from the Open Tender System both as a buyer and a seller for four months over a Ksh1.2 billion ($14.4 million) debt owed to KPRL. The ban was later lifted.

READ: KenolKobil agrees to pay KPRL $14.9m

The nine firms risk being suspended from participating in the open tender system (OTS) or cancellation of their licences, according to the circular issued by Energy Principal Secretary Joseph Njoroge. This means that they could be forced to buy expensive refined fuel from other marketers.

“This is, therefore, to forward them to you to take necessary action as required by law,” said Mr Njoroge in a letter sent to ERC’s acting director general Fredrick Nyang on September 26.

The Ministry of Energy has also asked KPC and the Oil Industry Pipeline Co-ordination Secretariat to immediately remove defaulters from sharing storage space (ullage) at Kipevu Oil Storage Facility in Mombasa. ERC on September 26 asked the affected companies to explain within 14 days why the regulator should not take legal action including cancelling of trading licences under the Energy Act of 2006.

It is feared that the impending withdrawal of licences will affect Uganda, Rwanda, Burundi, eastern DR Congo and South Sudan as some Kenyan owned firms supply fuel to their counterparts in the region.

To accord KPRL protection, the Ministry of Energy in 2012 introduced a rule requiring marketers involved in importation of refined products to buy 40 per cent of their requirements from KPRL in accordance with market share.

KPRL on September 25 this year notified the Ministry of Energy that cashflow had been severely affected as 852 tonnes of products for March allocation had not been paid for, for May (16,437 tonnes) and June (33,351 tonnes).

The refinery said some of the defaulted products have been disposed of and the affected companies informed accordingly but this does not take away the responsibility of the marketers to lift fuel in a timely way.

Vivo Energy, previously Kenya Shell, said the country’s continuous supply of fuel is at risk as the enforcement and regulation of the downstream sector is at an all-time low, leading some industry players not to be compliant.

“Marketers who are fully KPRL and regulation compliant continue to suffer as serial law and rule breakers thrive,” said Vivo’s managing director Polycap Igathe in an e-mail sent to the Ministry of Energy and copied to fuel firms on September 25.