KACC asked to probe $98.7 million Triton oil theft at Kenya Pipeline

Share Bookmark Print Rating

Cracking the whip: Energy Minister Kiraitu Murungi directed that KPC’s current external auditors immediately conduct a comprehensive forensic audit of all products held in the pipeline to determine its ownership. Photo/FILE 


Posted  Saturday, January 10   2009 at  10:33

A day before the dramatic sacking of Kenya Pipeline Company Ltd (KPC) managing director George Okungu late last Friday, Energy Minister Kiraitu Murungi had instructed the Kenya Anti-Corruption Commission to move into the firm to investigate the circumstances under which millions of litres of petroleum held in trust on behalf of financiers and international traders were irregularly released to the troubled Triton Oil Company.

It is a scandal that has left several leading international companies involved in financing oil imports into Kenya, Uganda and Rwanda as well as the Kenya Commercial Bank — who had all financed Triton to import the oil — at risk of losing a whopping Sh7.6 billion ($98.7 million) as a total of 126.4 million litres was released to Triton without their authorisation or knowledge.

Sources told The EastAfrican that the minister made the decision to call in KACC after holding a crisis meeting with the directors of the pipeline company on Wednesday last week.

Mr Murungi also directed that KPC’s current external auditors be immediately engaged to do a comprehensive forensic audit of all product held in the pipeline to determine its ownership and find out whether what is held in the stores tallies with records held by oil companies and financiers.

Already, two officials from the company’s operations department had been suspended.

But the mood within the corridors of Nyayo House, where the ministry headquarters is located, as we went to press on Friday, suggested that the minister intends to cast the dragnet wide enough to include top decision makers at the company. Sure enough, he began at the very top.

At stake is the integrity of one of the region’s most strategic facilities in the oil sector — often described as the spinal column of the petroleum industry in East Africa.

Documents seen by The EastAfrican show that the international oil trading and finance companies at risk include Glencore of the UK, Fortis Bank, Bank of Holland, Emirates National Oil Corporation of the UAE and the Kenya Commercial Bank.

Mr Murungi moved into action as it emerged that KPC itself was also widely exposed in the transaction and was at risk of being sued by oil companies and financiers.

Although the pipeline company has yet to receive any quantifiable claim from the affected financiers, The EastAfrican has learnt that several banks and institutions have written to the company seeking to be told why and how their product left the KPC system without written approval by authorised signatories.

It is also understood that one of the financiers, KCB, has already fired off a letter to KPC threatening to take legal action.

According to informed sources, news of the scandal was reported to Mr Murungi on Monday last week.

The minister thereupon ordered Mr Okungu to prepare a detailed report and to convene an urgent board meeting to deliberate on the matter.

Dealings between KPC and oil companies are usually done through a system known in the jargon as a Collateral Financing Agreement.

A critical facility in the financing of the oil business, this agreement is what has made it possible for small players to participate in the oil industry.

1 | 2 | 3 Next Page»