State expands oil import deal amid IMF, local dealers' scrutiny

Energy and Petroleum Regulatory Authority (Epra) Director General David Kiptoo. [Denis Kibuchi, Standard]

Two more cash-rich oil dealers have joined the government-to-government oil import deal amid mounting scrutiny of the initiative by the industry and the International Monetary Fund (IMF).

The deal pushed by President William Ruto enables Kenya to import fuel on credit from Gulf oil companies.

Energy and Petroleum Regulatory Authority (Epra) Director General David Kiptoo said in a statement yesterday that two more oil firms have been recruited to the programme, bringing the overall participants of the programme to five.

"Recently the international oil companies have added two other nominees; that is, One Petroleum Ltd and Asharami Synergy Ltd," he said.

Under the current arrangement, three Kenyan oil marketing companies (OMCs) own cargo upon delivery to Mombasa port by international Gulf-based oil giants Emirates National Oil, Abu Dhabi National Oil and Saudi Aramco.

The Kenyan OMCs are Galana Oil, Gulf Energy and Oryx Energy.

Newly recruited One Petroleum is a subsidiary of Mbaraki Bulk Terminal Ltd, a multi-petroleum products handling facility at the port of Mombasa.

Asharami Energy is a subsidiary of Sahara Group, a Gulf-based oil multinational whose shareholders have interests in Emirates National Oil, Abu Dhabi National Oil and Saudi Aramco.

Shrouded in mystery

The expansion of the deal is likely to attract additional scrutiny from the local oil marketers who have questioned the legality of the current deal.

Local firms had earlier protested against the deal, alleging its terms are opaque and shrouded in mystery.

IMF also recently called for a market-led solution in the energy sector even as it revealed that the National Treasury had signalled that the government intends to exit the Ruto oil import arrangement.

The OMCs who missed out on the deal have complained about Epra favouring Galana, Gulf and Oryx, saying the previous Open Tendering System (OTS) brought about fairness that the current G-to-G plan has taken away.

Yesterday, however, the Epra boss dismissed the fears surrounding the programme, saying the process has been open and transparent and has not favoured any parties.

Kiptoo said Epra, through the Ministry of Energy and Petroleum, furnished the international oil companies with a list of licensed OMCs from which they were to choose the preferred counter-party in Kenya.

"The international oil companies were therefore restricted to this list," he said.

"Any other counter-party will be chosen by the international oil companies from the list of licensed OMCs provided by EPRA."

On some of the nominees owning holding terminal facilities at Mombasa, Kiptoo said the products imported under the G-to-G programme are all received at the State-owned and operated Kipevu Oil Storage Facility and not in private terminals, ruling out any conflict of interest.

Regarding Asharami Synergy Ltd, which is part of the Sahara Group of companies, he said it is an indigenous African company with its origin in Nigeria.

"Further, the nomination of a local OMC does not amount to the award of tender since the contract for supply is between GOK and the international oil company.

"The contract terms are fixed and do not have any variable cost components influenced by the international oil company's counterparty in Kenya," added Kiptoo.

He revealed that recent negotiations with the Gulf companies have resulted in reductions of the freight and premium by $30 per metric tonne equivalent to about Sh4.13 per litre at the current exchange rate.

"We believe as the sector regulator that the G-to-G contributed greatly to solving the security of supply of petroleum problem across the country which was prior to April 2023 acute and caused by US Dollar liquidity issues."

IMF cited the Treasury acknowledging the distortions the oil deal has created in the foreign exchange market and the accompanying increase in rollover risk of the private sector financing facilities supporting it.