National Energy Policy - Final Draft - 14 Nov 2013

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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
3. The prices in Kenya as published by the ERC are competitive compared to the prices in theregion and other countries like South Africa as shown in Figure 2.3.Figure 2.3 - Prices for different countries converted to Kenya shillings per litreComparison of July 2012 Super Petrol Pump PricesSouth AfricaTanzaniaKenyaIndiaNorwayPMS (Kshs/litre)UKFrance0 50 100 150 200 250Source: ERC, AIT/FIA Information Centre-OTA, July, 20124. In addition, the economies of scale benefit the smaller OMCs, which are mostly localentrepreneurs. However all parties must abide by the terms and conditions of the agreementwhich stipulates equal participation without favouritism in the spirit of creating/promoting a levelplaying field.2.2.9 Global Geo-Political Issues1. On the international scene, petroleum prices have been on a continuous but gradual increase.There are a number of geo-political issues that affect the oil prices in the international scene.These include the unrest in the Middle East countries, reduction in production by OPEC, piracyin the Indian Ocean, increased demand for petroleum products worldwide, foreign exchangefluctuations and fluctuations in the USA strategic reserves.2. This fluctuation of the international prices has been causing a shock to the domestic oil prices.Figure 2.4 shows the time series of the average pump prices in Nairobi and the movement inmurban crude oil prices between January 2008 and May 2011. In particular, over the periodNovember 2010 to April 2011, the increases in pump prices were 23% for super petrol, 24% fordiesel and 22% for kerosene.3. The imported petroleum products are paid for in US Dollars. Figure 2.4 also shows thefluctuation of the exchange rate against the US dollar for the period November 2010 to March2012 which shows an overall gradual depreciation. In particular, there was a markeddepreciation over the period November 2010 to June 2011. The depreciation of the Kenya25 2.0 – FOSSIL FUELS
Page 1 and 2: NOVEMBER 2013 DRAFTREPUBLIC OF KENY
Page 3 and 4: 2.4.4.1 Challenges in Coal explorat
Page 5 and 6: 4.5.5 Policies and Strategies and I
Page 7 and 8: Table 10.1 Energy Generation Potent
Page 9 and 10: FOREWORD BY THE CABINET SECRETARY F
Page 11 and 12: EXECUTIVE SUMMARY1. This policy doc
Page 13 and 14: 14. To enhance exploitation of the
Page 15 and 16: 24. The Government shall establish
Page 17 and 18: 1.0 - INTRODUCTION1.1 THE ROLE OF E
Page 19 and 20: (k) Promote appropriate standards,
Page 21 and 22: (e) The Weights and Measures Act, C
Page 23 and 24: fund, mobilizing resources for rura
Page 25 and 26: 2.0 - FOSSIL FUELS2.1 BACKGROUND1.
Page 27 and 28: immense value through acquisition o
Page 29 and 30: and averaging at more than US$110 p
Page 31: town of Mombasa, through Nairobi to
Page 35 and 36: 6. It is hoped that the discovery o
Page 37 and 38: (c) High sulphur levels have advers
Page 39 and 40: Policies and StrategiesPetroleum Ex
Page 41 and 42: Policies and StrategiesPetroleum Su
Page 43 and 44: plants has several advantages over
Page 45 and 46: Natural GasShort Term2014-2017Mediu
Page 47 and 48: 3. The introduction of clean coal t
Page 49 and 50: 6. Lack of a special purpose vehicl
Page 51 and 52: Policies and StrategiesFossil Fuels
Page 53 and 54: 4. Geothermal power plants use stea
Page 55 and 56: about 1,450MW remains unexploited.
Page 57 and 58: 8. Ownership of physical dam reserv
Page 59 and 60: (d) Competing interests between dev
Page 61 and 62: 3.4.2 Challenges1. Unsustainable us
Page 63 and 64: 4. Land will need to be set aside f
Page 65 and 66: Limited in Kilifi County generates
Page 67 and 68: high temperatures estimated at 4-6
Page 69 and 70: Policies and StrategiesSolar Energy
Page 71 and 72: 3. Inadequate wind regime data.4. L
Page 73 and 74: through co-generation and bioethano
Page 75 and 76: (d) 1 sea wave energy projects with
Page 77 and 78: 3.12.3 Policies and Strategies and
Page 79 and 80: 4.0 - ELECTRICITY4.1 BACKGROUND1. E
Page 81 and 82: 2. It is estimated that as at 2013,
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Figure 4.2 - Evolution of the Energ
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(e) Thermal power plants have a rel
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6. Nuclear fuel can be recycled and
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Policies and StrategiesNuclear Elec
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Table 4.5 - Planned Regional Inter-
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to this worsening situation leading
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4.5.5 Policies and Strategies and I
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Policies and StrategiesRural Electr
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Policies and StrategiesElectricity
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7. The energy policy and the Energy
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6.0 - LAND, ENVIRONMENT, HEALTH AND
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6.2.3 Renewable Energy1. Generally,
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causes indoor air pollution leading
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6.5 DISASTER PREPAREDNESS AND MITIG
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from the licensee.Policies and Stra
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Policies and StrategiesEnvironment,
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6.7.4.4 Nuclear ElectricityPolicies
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of the risk levels.Policies and Str
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6 It is a further requirement under
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Policies and StrategiesAccess to En
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Kenya.Policies and StrategiesEnergy
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15. Seek financing of clean energy
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Figure 8.1 - Pass-Through Costs in
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Table 8.1 - Energy Tariffs and Cost
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Policies and StrategiesEnergy Prici
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Policies and StrategiesCross Cuttin
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3. In 2009, ERC established a commi
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9.3.3 Policies and Strategies and I
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9.7 ENERGY RESOURCES BENEFITS SHARI
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10.0 - ANNEXURESAnnex 10.1 The PSC
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Table 10.3 Nuclear electricity gene
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Table 10.4 Summary of the Energy St
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County Population Area (km 2 ) Foss
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ACRONYMS AND GLOSSARY OF TERMS1. AC
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RD&DREAREPRMSSMRsSAPPToEVATWpResear
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Reticulation means the network used
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National Energy Policy - Final Draft - 14 Nov 2013

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