National Energy Policy - Final Draft - 14 Nov 2013

water bodies in the region. There is need to enhance sea and lake transport by acquiring thenecessary tankers and the development of the necessary loading infrastructure.2.2.6.4 Road Transport1. Road transport is used to move petroleum products from various depots that are located inMombasa, Nairobi, Nakuru, Eldoret and Kisumu to their environs and to other towns.Transportation of products from Mombasa to the hinterland is also undertaken by road since thepipeline system experiences challenges in meeting the demand for petroleum productsupcountry.2. The use of road transport for petroleum fuels is expected to go down drastically once thepipeline system capacity is enhanced as planned. However, road transport will continue to playa key role in distribution of the products from the KPC depots to the consumers hence the needto have an efficient road system.2.2.7 Oil Marketing Companies1. As at June 2013 there were 88 OMCs licensed to import petroleum products and 176companies licensed to market petroleum products in Kenya, and more are expected to join.The licensing criteria have been simplified to facilitate the entry of indigenous traders in the oilbusiness. However, the market is still largely oligopolistic with 80% being controlled by the bigfour OMCs.2. Government plans to put in place a strategy to encourage the growth of indigenous OMCs byestablishing more infrastructure for storage and sourcing. Establishment of open accessstorage facilities by investors who are not necessarily OMCs should be encouraged as a matterof policy to further facilitate the operations of OMCs which might not have individual storagefacilities. Incentives on land, levies and taxes should be put in place to attract private sectorinvestment in storage facilities.2.2.8 Open Tender System1. Importation of petroleum products is through the Open Tender System (OTS). The crudeimports meet about 45% of national demand. The rest (55%) is imported as refined products ofwhich 70% is also imported through OTS. Importation of petroleum products through the OTSallows all the OMCs to access petroleum products at the same price and therefore ensurescompetition in the petroleum market. Since OTS is run through monthly tenders, it entailssourcing of petroleum predominantly from the spot market whereby petroleum is sourced fromthe open market without any prior contracts.2. The industry recognizes that OTS is an effective supply system that creates a competitive,transparent means of availing the product for the Kenyan economy, employing economies ofscale. This is demonstrated by the fact that the duty free landed cost of fuel in Kenya is amongthe lowest in Africa.24 NATIONAL ENERGY POLICY FINAL DRAFT NOVEMBER 2013