Consumers in the region will pay more for fuel in coming months following Kenya’s decision to raise money to repay Ksh7 billion ($82.3 million) owed to oil marketers by the Mombasa-based Kenya Petroleum Refineries Ltd through a special fund.

Prices of imported petrol and diesel are expected to rise by at least Ksh1.30 ($0.015) per litre.

The projected rise in pump prices could not have come at a worse time. Consumers are already grappling with the high cost of petroleum products.

On Wednesday, the Energy Regulatory Commission (ERC) raised the maximum retail prices for petrol, diesel and kerosene due to rising global oil prices and a depreciating local currency. The higher prices are likely to put upward pressure on Kenya’s inflation rate, which rose to 6.02 per cent last month from 4.91 per cent in June.

In Nairobi, the price of a litre of super petrol was increased by Ksh2.74 ($0.03) to Ksh112.26 ($1.3), that of diesel by Ksh1.58 ($0.01) to Ksh104.44 ($1.2) and that of kerosene by Ksh4.44 ($0.05) to Ksh83.93 ($0.98).

The Ministry of Energy is yet to finalise the proposed compensation scheme, which has been welcomed by big players as vital to recovering their losses but opposed by small firms fearing an increase in overheads.

The big oil marketers are owed the most in the dispute that has over the past one year rocked the oil industry, threatening to disrupt the supply of petroleum products in Kenya and its landlocked neighbours Uganda, Rwanda, Burundi and Congo.

Oil marketers are by law required to meet 40 per cent of Kenya’s fuel needs by processing crude oil at KPRL in Mombasa and the balance through imports of refined fuel under the competitive open tender system (OTS) co-ordinated by the Ministry of Energy.

The ministry last week sent out a notice to oil marketers seeking to amend the terms and conditions signed on June 1, 2011 under the merchant refinery scheme to create the fund that will help raise the outstanding funds.

“Companies suffered significant yield shift losses as a result of variation between actual crude processing yields and deemed yields details… set out in forensic audit by Deloitte Consulting,” said the document. Deloitte had recommended consultations on how reparation should be effected.

The refinery has been stumbling from one crisis to another in its battle with oil marketers, landing it in a financial crisis that threatened to render it incapable of refining petroleum products.

READ: Kenya refinery could lose $350m fund facility

Late last month, the refinery entered into an agreement with KenolKobil to have the oil marketer pay the Ksh1.3 billion ($14.9 million) it owed the refinery and drop all cases against the facility. With the new deal to compensate the oil marketers for the yield losses, analysts say the refinery will have space to concentrate on improving its efficiency.

READ: KenolKobil agrees to pay KPRL $14.9m

Oil marketers said the 50-year old refinery was using outdated technology that had created operational inefficiencies at the plant, costing them about Ksh7 billion ($82.3 million) in yield losses, a situation that had seen them threaten not to use the facility starting last month. But whereas the refinery admitted there are inefficiencies at the plant, it argued that it is not legally liable for the yield losses.

The oil firms have been notified by the ministry that the terms and conditions of OTS are to be amended with the introduction of an additional cost of Ksh1,500 ($17.24) per metric tonne on petrol and diesel as yield shift recovery.

The ministry has recommended that the yield shift recovery be an item of “cost build factors” applicable in respect of imported refined petrol and diesel only, excluding Jet A-1 for the aviation industry.