The High Court has certified as urgent a petition by the Consumer Federation of Kenya (Cofek) challenging a Sh93.68 billion oil storage agreement between the government and Gulf Energy.
Cofek says the agreement, signed on August 26, grants Gulf Energy E&P B.V. the right to use Kipevu Oil Terminal II for crude oil storage and handling for 25 years.
The consumer lobby wants the court to determine whether the process leading to the agreement, its execution and continued implementation meet constitutional requirements on transparency, accountability and prudent management of public resources.
It is also seeking a determination on whether the deal was subjected to a fair, equitable, transparent, competitive and cost-effective public procurement process.
“The matter is certified urgent. The application, the petition and these directions to be served physically and a return of service be filed,” the court said.
Cofek argues that information available to the public does not show whether the opportunity was subjected to an open and competitive process, whether expressions of interest were invited, whether alternative operators were considered, what criteria were used to select Gulf Energy, or what statutory procedure was followed in agreeing.
Court documents claim that Kenya Petroleum Refineries Ltd (KPRL), a subsidiary of the Kenya Pipeline Company (KPC), signed the agreement without publicly disclosing its details.
“The petition challenges the constitutional propriety of committing strategic petroleum infrastructure to a particular private operator for a period of twenty-five years without sufficient public disclosure of the material contractual terms, the process leading to the agreement, the basis upon which the contracting party was selected and the regulatory scrutiny and approvals attendant thereto,” Cofek secretary-general Stephen Mutoro said.
Mr Mutoro said the court should determine whether the long-term use of strategic petroleum infrastructure implicates Articles 201 and 227 of the Constitution and whether the applicable regulatory framework was complied with.
Consumer Federation of Kenya (Cofek) Secretary-General Stephen Mutoro.
Photo credit: Lucy Wanjiru | Nation Media Group
According to the petition, the agreement is projected to generate about Sh93.68 billion over its lifespan and has already been executed despite what Cofek describes as unresolved constitutional questions surrounding the process that led to its signing.
“Despite the magnitude, duration and strategic character of the impugned agreement, its material terms and the process through which the 3rd Interested Party (Gulf Energy) was selected have not been disclosed to the public, thereby raising substantial questions of constitutional transparency, accountability and regulatory compliance,” Mr Mutoro said.
He argued that continued implementation of the agreement could create long-term contractual and operational commitments that would be difficult, costly and disruptive to reverse if the petition ultimately succeeds.
Mr Mutoro said KPRL operates significant petroleum storage and handling facilities at the former refinery complex in Mombasa, which form part of Kenya’s broader petroleum storage and logistics infrastructure.
A vessel offloads fuel at Kipevu Oil terminus within the port of Mombasa in this picture taken on November 13, 2019. The oil import system meant to cure the dollar shortage has hit headwinds.
Photo credit: File | Nation Media Group
“I verily believe that this dispute transcends the private commercial interests of the contracting parties and concerns the wider public interest in the lawful, transparent, accountable and prudent utilisation of strategic petroleum infrastructure over which the public retains an enduring interest,” he said.
Cofek further argues that information currently in the public domain does not disclose the full contractual terms governing tariffs and tariff-setting methodology, capacity allocation, exclusivity arrangements, termination and renewal clauses, access by other users, allocation of commercial and operational risks, and the rights and obligations of the parties over the 25 years.
