October 23, 2011 [Business Daily] – Kenya’s projection of long-term economic growth points to higher demand for petroleum products which has seen marketers seek larger storage capacity to enhance supplies and incomes.
Local oil marketers said that storage inefficiencies resulting from ageing facilities at the Kenya Petroleum Refineries Limited (KPRL) and Kenya Pipeline Company’s (KPC) ineptness hamper supplies forcing them to raise prices.
Listed oil marketer Kenol Kobil is among oil marketers that have resorted to enlarging storage capacity to enhance supple and earnings. This year, the company managed to remain on a growth path despite a tough market environment.
The company’s 83 per cent growth in earnings to Sh2 billion this year was attributed to prudent management of its fuel stocks, extensive fuel storage facilities, and diversification.
The company has been involved in acquisition and expansion of storage facilities to mitigate any disruptions in the distribution system.
“We have reduced our reliance on the KPC system to avoid inconveniences that come with lack of capacity,” said public relations manager Charles Njogu.
Profit warning
Recently, the firm acquired a new terminal in the Democratic Republic of Congo with a capacity of four million litres.
The firm targets to create storage capacity of up to 70 million litres this year.
Kenol Kobil has also invested significantly in depot facilities in various parts of the country, as well as in Tanzania, Burundi, Uganda and Mozambique.
The firm is also building a terminal in Lusaka, Zambia, with capacity to store six million litres of fuel.
Investment in inventories stretched the firm’s borrowing costs by Sh6 billion to Sh20 billion in the first half of the year compared to the same period last year.
However, all is not well with other market players such as Total Kenya which has issued a profit warning after its half year earnings dropped by 73 per cent.
The firm linked the decline in profits to a drop in sales volumes and the rising cost of doing business.
Instances of oil shortage at various outlets were common in the first half of the year.