Thursday, September 08, 2005

Oil $ense

Fuel prices this month have crossed above the $1 (77 shillings) per liter barrier (approx equivalent is $4.5 per gallon). Amid the threats to de-license fuel companies, hype on new un-leaded or improved fuels, Katrina & falling international oil prices, it is difficult to get a straight answer from anyone responsible in the petroleum sector.

So I refer back to the 2005 AGM of Total Kenya held in April which I attended, and which turned out to be an extraordinarily informative afternoon with Momar Nguer, the Chairman & Executive VP East Africa & Indian Ocean. He took on written questions from all shareholders present on all matters from the company’s performance to the oil costs, taxes, cooking gas, and politics:

Some notable points:
- It is cheaper for Total and oil companies to import petrol and diesel into the country, but they are required to import crude and refine 70% at the government refinery in Mombasa. Unfortunately this also means higher fuel prices for motorists
- The government reneged on a deal to waive all taxes on cooking gas and cylinder’s (as it is with kerosene). Nguer believes that this is the only way to reduce the cost of cooking gas in Kenya.
- Government also reneged on an agreement it signed to mandate the use of low-sulphur diesel and unleaded petrol by 2006. Our Mombasa refinery cannot produce these fuels yet - and this has also prevented willing governments like Rwanda & Uganda (who import though Mombasa) from implementing the same.
- OPEC has proved ineffective in managing the price of oil
- He does not expect oil prices to go down any time soon owing to the great demand of China and Asia
- Oil is a low margin business, and profit come from increasing volumes, not prices
- Network fuel stations only contribute 1/6 of Total’s sales.


tomas said...

Thanks for the information on the oil industry. I've personally learnt that ignorance is very expensive. i had no Idea that the gvt reneged its promise to cut taxes on the cooking gas.
It seems that we have been dealing witha gvt that is looking more and more like a mirage in the distance. But let me not bitch!! I'll use this information and pass it on to others.

bankelele said...

Mr. Nguer is a straight-talking MD


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