KENYA: PROPOSED NEW REGULATIONS ON MIDSTREAM AND DOWNSTREAM PETROLEUM SECTOR

The Energy and Petroleum Regulatory Authority (the “Authority”) has developed a set of draft regulations to accommodate the substantive changes introduced by the Petroleum Act, 2019. The proposed regulations seek to regulate various aspects of the midstream and downstream petroleum activities and will repeal existing regulations promulgated under the repealed Energy Act, 2006.

The draft regulations were published in the Kenya Gazette Vol. CXXII No. 242 of 31st December 2020. The draft regulations may be accessed here.

We set out below a high-level summary of the proposed regulations:

1. The Petroleum (Business Licensing and Facility Construction Permit) Regulations, 2020

The proposed regulations will apply to the licensing of petroleum businesses and construction of petroleum logistics facilities and sets out the procedure, requirements, timelines and obligations applicable to licensees. If enacted, the regulations would repeal the Energy (Licensing of Petroleum Logistics Business and Facility Construction) Regulations 2013.

Some of the key changes proposed include:

• the introduction of fees for application, renewal and amendments of permits issued under the regulations;
• the requirement to obtain approval of the Authority prior to effecting any changes in the directorship of a company with Petroleum Business Licence;
• the requirement to provide an environmental liability policy when making an application for petroleum business licence; and
• stiffer prescribed penalties for breach of the conditions of the licence and the provisions of the regulations.

2. The Petroleum (Operation of Common User Petroleum Facilities) Regulations, 2020

The regulations provide a framework for operation of common user facilities ensuring open and non-discriminatory access by all third party users. The regulations also provide a framework for the determination and approval of tariff charges to third party users.

3. The Petroleum (Importation of Petroleum Products) Regulations, 2020

The draft regulations seek to consolidate and update the various regulations governing to the current open tendering system (OTS) for the importation of refined petroleum such as super petrol, diesel and dual purpose kerosene.

4. The Petroleum (Information and Statistics) Regulations, 2020

The proposed regulations seek to repeal and replace the Energy (Petroleum Information and Statistics) Regulations 2013. Unlike the Energy (Petroleum Information and Statistics) Regulations 2013 which prescribed reporting requirements to petroleum refining business, importation and sales of petroleum products, liquefied petroleum gas (LPG) and storage facility business, the proposed regulations will apply to all licensees or holders of any licence issued under the Petroleum Act.

All licensees will be required to submit specific information to the Authority by the tenth (10th) calendar day of each month.

5. The Petroleum (Licensing of Petroleum Road Transportation Business, Road Tankers and Drivers) Regulations, 2020

The proposed regulations will repeal the Energy (Licensing of Petroleum Road Transportation Business) Regulations 2013. They provide framework for licensing of petroleum transportation business, road tankers and drivers.

6. The Petroleum (Lubricants Facility Construction and Business Licensing) Regulations, 2020

The proposed regulations provides framework for the construction of lubricant facilities and licensing of lubricant business involving the importation, blending, bulk storage and bulk transportation of lubricants.

7. The Petroleum (Minimum Operational Stock) Regulations, 2020

The proposed regulations will repeal the existing Energy (Minimum Operational Stock) Regulations, 2008.

The regulations provide a framework for maintaining minimum operational stock of petroleum products including LPG, aviation gasoline, premium motor spirit, jet fuel, illuminating kerosene, automotive gas oil and heavy fuel oil to ensure uninterrupted supply of petroleum products. The minimum operational stock days’ consumption for each of the petroleum product has been reduced substantially from the period provided in the present regulations.

8. The Petroleum (Pricing) Regulations, 2020

The proposed regulations will repeal and replace the Energy (Petroleum Pricing) Regulations 2010 which apply in relation to pricing of super petrol, illuminating kerosene and automotive gasoil or diesel sold in Kenya or imported through the OTS.

Under the regulations, the Authority will be permitted to compute and publish wholesale and retail prices of petroleum products to take into account changes in law impacting on the costs of petroleum products at any time between the monthly publication periods on 14th day of every calendar month.

9. The Petroleum (Products Quality Management) Regulations, 2020

In a bid to ensure quality of the petroleum products imported into Kenya whether for home use or transit, the Authority proposes the new regulations requiring conformity of all petroleum products with the specifications set out in the Kenya Standard or any international standard approved by KEBS.

The regulations prescribe stiff penalties for non-conformity with the prescribed standards including closure of sites, suspension of driver certificates, payment of fines and publishing of non-compliant sites or tankers.

10. The Petroleum (Retail Station Construction and Licensing) Regulations, 2020

The proposed regulations seek to repeal the Energy (Retail Facility Construction and Licensing) Regulations, 2013. The regulations will apply in relation to the construction of retail dispensing sites and the licensing of petroleum retail businesses operating in Kenya.

11. The Petroleum (Strategic Stocks) Regulations, 2020

The proposed regulations will revoke the Energy (Petroleum Strategic Stock) Regulations 2008, if passed.

The regulations apply in relation to the maintenance of petroleum product strategic stocks, designation of petroleum strategic stocks, bulk storage depots for premium motor spirit, illuminating kerosene, jet fuel; automotive gasoil or diesel and LPG.

Invitation to comment on the proposed petroleum regulations

The Authority has invited all stakeholders to provide their comments on the draft regulations on or before 1 March 2020. The Bowmans Projects and Infrastructure team will be participating in this consultative exercise.