Senate wants Sh48b pipeline deal probed - Kenya

June 22, 2017, 10:45 pm

A parliamentary committee has called for investigations into how the cost of constructing a new oil pipeline from Mombasa to Nairobi rose by Sh10 billion.

Senate Energy Committee, chaired by Baringo Senator Gideon Moi, has given Auditor General Edward Ouko 90 days to conclude the investigations and hand over a report.

The tender Kenya Pipeline Company (KPC) awarded to Lebanese firm, Zakhem International Constructions Ltd, was initially worth Sh48 billion.

Calls for investigations into the matter came amid questions as to whether KPC followed procurement procedures when awarding the contract and why the completion date was moved twice.

It had been agreed the project would take 18 months, with April 28, 2015 as the date of completion, according to the committee. However, the main contractor, the Lebanese company, requested five more months in January 2016, at a further Sh4.1 billion.

And in September 2016, the committee says, the company asked for a further seven months at another cost of Sh6.5 billion, to increase the cost of the project by Sh10,859,808,047.

The committee called for a special audit after the Lebanese company reportedly ignored its summons to appear before it to explain the variations.

"Our attempts to meet the main the contractor have proved unfruitful to date. However, meetings with Kenya Pipeline Company and the sub-contractors working on the pipeline indicated the project was near completion, with many of them having completed their work," the committee said in a letter dated June 13.

The letter adds: "The committee has therefore resolved a forensic audit of the line be undertaken within 90 days starting June 14."

The committee has in the past questioned the tender, with Gideon saying they suspected 'elements of international fraud'.

The senators want Ouko's team to investigate how the tender was awarded and whether KPC complied with the law when advertising, processing and awarding the tender.

The team also wants the Auditor General to establish the professional suitability of Zakhen International Constructions Ltd as well as sub-contractors involved in the constructing the new oil pipeline.

It also wants Ouko to determine the justification for extension of time as requested by Zakhem, which, in the process, increased the cost of the project.

When he appeared before the committee, KPC managing director Joe Sang said the Sh10 billion claim was being scrutinised by the company after which a decision on whether or not the amount should be paid would be made.

"The management team is going through the Sh10 billion claim. We have not paid the claim and if it were to be paid, it will be done within the law," Sang said.

Meanwhile, Sang said there were delays in financing the project as no bank was able to do it alone. Thus, the company ended up working with six banks.

The new pipeline will replace the current 38-year-old one. Only three sub-contractors - Quality Inspectors Ltd, Straccon Engineering Ltd and Dynamic Green Technologies Ltd - appeared before the committee when they were summoned.

The new pipeline is expected to move at least 6.8 billion litres of petroleum by 2020 and remove over 700 petroleum trucks from roads.

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