Queries as oil company boss sit in energy sector regulatory board

The appointment of an oil marketer executive into the highest organ in the energy sector regulator has sparked an outcry over conflict of interest.

Total Kenya’s strategy and corporate affairs director Macharia Irungu was appointed as a commissioner at the Energy and Petroleum Regulatory Authority in a move that has raised eyebrows within and outside the industry.

The entry of Dr Irungu, who is also the managing director of Gulf Africa Petroleum Corporation (GAPCO) Kenya Ltd, another oil marketer recently acquired by Total Group, has irked even high-ranking personnel within the commission who believe it is bound to cause regulatory interferences.

On Thursday, Consumer Federation of Kenya secretary-general Stephen Mutoro wrote to the Ministry of Energy to express concerns over the potential conflict of interest, terming the move as “shocking”.

“Clearly, this is unacceptable; a case of severe conflict of interest. If not immediately reversed, the move will ultimately lead to a case in which it goes against the Constitution (Article 27), disadvantage other players and especially consumers. Indeed, it is a case of being a player and a referee at the same time,” Mr Mutoro wrote in the petition.

“We demand that Dr Irungu be immediately dropped, failure to which we will seek legal redress against yourself and the Attorney-General for failure to uphold the rule of law and protect public interest.”

The conflict was largely undeclared until British American Tobacco appointed Dr Irungu into its board earlier in the week. BAT then listed his other positions where his high-ranking roles in the two oil marketing companies and the regulator came out.

According to lawyer Ken Amondi of Amondi and Company Advocates, who had legally contested the introduction of Value Added Tax on petroleum products last year, the conflict of interest is hard to avoid.

“For any regulatory body, it is hard to have someone play both roles and still avoid a conflict of interest. By virtue of occupying that position, the person is predisposed to the conflict and trying to avoid it may as well adversely affect his performance at EPRA, so in practice, having to recuse oneself all the time will be a tall order,” Mr Amondi said.

Multiple sources at EPRA, including those in senior positions who asked not to be disclosed so that they are not seen as opposing Dr Irungu’s appointment, said the potential conflict of interest may be a big blow to some of the decisions they make, in which Total or its close associates play in.

“Remember Total is not just alone here since they have an industry lobby group which he will be required to support by virtue of being an oil marketer. So should we arrive at a decision that favour Total or GAPCO, then his hand will obviously be seen and if we chose a member of the petroleum lobby group where Total belongs, then those outside the lobby group will doubt our independence,” the source said.

Government officials, however, defended Dr Irungu’s appointment to the apex body at the energy regulator. Petroleum PS Andrew Kamau, who distanced his ministry from the appointment, also saw no problem with the appointment citing the need for a stakeholder within the regulator to articulate issues about the sector.

Mr Kamau said Dr Irungu would be free to recuse himself in decisions that would directly cause a conflict, like when his oil marketing firms are involved.

“I don’t see anything wrong with that. In fact, it would be better if they had a transporter in the EPRA team as well to represent the interests of transporters. That is the only way they will have direct touch with the issues affecting the sector. One can always declare conflict of interest and withdraw from matters that create the conflict of interest,” Mr Kamau said.

EPRA director-general Pavel Oimeke did not respond to queries over the contentious issue. But given that Dr Irungu is now one of his bosses, he may have had little to say.

Energy Principal Secretary Joseph Njoroge said the new Energy Act would determine if there was any conflict. The PS said the EPRA boss would have raised a red flag already were there any conflict of interest in the recent appointment that has got tongues wagging in the energy circles.

On Saturday, Energy CS Charles Keter too sought to downplay the matter saying Dr Irungu’s appointment to the authority was no threat to smooth operations there.

“This is a very transparent industry. And his appointment does not jeopardise anything,” he said.

Dr Irungu, on the other hand, said he had done a good job in representing the industry’s interest at the Authority.

“I having being representing the oil industry both as a director of PIEA and vice-chairman Supplycor Kenya (an independent legal entity incorporated by the oil marketing companies in Kenya to coordinate activities along the fuel supply chain). We needed to have our own in EPRA as an expert I. Before meetings happen members declare any conflict of interest! As far as I am concern I have represented the oil industry fairly … I believe the director-general and chairman of the organisation can bare me witness,” he said.

Under the new Act, the EPRA board where Dr Irungu now sits is tasked with regulating, monitoring and supervising upstream petroleum operations in Kenya in accordance with the law relating to petroleum.

The regulator also coordinates the development of upstream petroleum infrastructure and promotes capacity building in upstream petroleum operations, an area where Total is a major player.

The board also advises the CS responsible for matters relating to petroleum in the evaluation of bids and applications made for upstream petroleum blocks, raising further potential conflict of interest.

Additional reporting by Justus Wanga.