Low-standard fuel imports set off alarm bells yet prices remain high

Economists say lower standard petroleum should cost less at the pump. [File, Standard]

The government’s decision to relax fuel quality standards and allow the importation of higher-sulphur diesel is coming under growing scrutiny, with industry experts warning that the move could open the door to dirtier and potentially harmful fuel entering the Kenyan market.

The lower standards have also not resulted in price reprieve for motorists, even as economists say that lower quality fuel should come at a lower price.

Energy sector players have questioned the rationale behind the waiver issued by the Ministry of Trade late April, noting that major global refineries have in recent years shifted production towards cleaner low and ultra-low sulphur fuels.

Globally, fuel production is now largely pegged on a sulphur limit of 10 milligrammes per kilogramme (mg/kg), a standard Kenya had only recently adopted.

But in a move that has kicked up a storm, the government suspended the 10mg/kg standard for six months and allowed diesel with sulphur content of up to 50 mg/kg.

The decision has triggered fears that Kenya could become a dumping ground for lower-quality fuel that many countries are steadily phasing out. 

This is also expected to affect Uganda and South Sudan and parts of DR Congo, by virtue of the fact that these are landlocked, transit markets whose diesel must pass through Mombasa

Critics have also questioned why Kenyan consumers have not seen a reduction in pump prices despite the shift to cheaper, higher-sulphur diesel imports.

Record highs

Pump prices have instead continued to climb to record highs, raising concerns that motorists and businesses are being exposed to dirtier fuel without enjoying the benefit of lower energy costs that would ordinarily be used to justify the policy direction.

“There is concern that some cargoes coming into Mombasa could effectively be a blend of fuel oil and clean diesel,” said one industry player familiar with regional fuel imports, warning that such practices could damage engines, worsen pollution and reverse gains Kenya has made in improving fuel quality.

The ministries of Trade and Energy explained that the lowering sulphur content requirement in fuel  is aimed at ensuring that Kenya has adequate fuel stocks as it navigates the crisis in the Middle East that has resulted in unavailability of petroleum products.

Industry experts, however, note that a majority of the refineries in the countries where Kenya sources petroleum products have in the recent years been adjusting their equipment to produce ultra low sulphur products. They also point out that the international oil companies in the Government to Government (G2G) deal produce low sulphur fuel in the facilities that they operate in different regions. 

These claims are backed by the products that Kenya has been importing in recent months.

Documents seen by The Sunday Standard show that diesel cargoes coming into Kenya this year had extremely low sulphur content, many of them way below 10mg/kg.

The Certificates of Quality, issued by globally renowned testing firms, show instances where the content is extremely low.

In one instance, the certificates show a cargo tested at the loading port on February 19 this year had sulphur content of 4.4mg/kg and another tested on April 20 had content of 5.7mg/kg. 

And industry sources said this has been the trend for sometime now.

In keeping with this waiver, The Sunday Standard has obtained the certificate of quality for a cargo imported by the vessel MT Fortitude KG11A/2026, which has a sulphur content of 36mg/kg. It is among the first cargoes that have been imported under the new high sulphur regime.

Another cargo discharged in early  May also had high sulphur content, with a reading of 50mg/kg, nearing breaching the high threshold recently set by the government. 

Documentation of the cargo shows that the cargo was loaded on the ship at a port in Saudi Arabia between April 14 and April 24, which was ahead of the waiver that was communicated by the Trade Ministry on April 30. This has raised concerns as to whether the owners of the cargo had information on the planned waiver before it was in place. 

“If you procure diesel today, you find that it’s coming at below 10mg/kg. If you  take a random certificate of quality, you find that all diesel cargoes coming to Mombasa and Dar es Salaam are all low sulphur,” said the source, adding that petroleum sector consultants and oil dealers who have to procure high sulphur diesel such as that used on ships or thermal power plants have to put in the orders in advance and this is only done by a few refineries.

The source explained that while there are refineries that produce high sulphur fuel, they are few and far between. These are facilities that produce especially heavy fuel, including what is used to run ships and also on thermal power generators. 

“We now have a situation where it’s impossible to get a refinery that produces fuel with sulphur content of 50mg/kg. The products by the G2G firms — Aramco, Enoc and Adnoc — have a content of 10mg/kg or below. Now, if the Cabinet Secretary is saying that we’re going to allow 50mg/kg, where is that diesel going to come from? The Ministry needs to clarify this to the general public.” 

He further sees a possibility where unscrupulous players may be looking at procuring such heavy fuel and even condemned dirty fuel and blending it with the low sulphur cargoes.

“What is likely to happen is blending. You take clean 10mg/kg diesel and mix it with heavy or off-spec fuel. The question is where the 50mg/kg cargo will come from if it is not in the mainstream supply chain,” he said.

“The G2G companies do not produce it. European and even Indian refineries do not do 50mg/kg. All the cargoes. if you look at the Certificates of Quality, have sulphur content below 10mg/kg. In fact, many of them between four and six mg/kg. These people might be planning to procure diesel that is not used for motor vehicles. And blend it with the 10 ppm cargoes.”

Despite the lowering of the standards which economists noted should have offered relief at the pump, prices in Kenya surged to record highs in the latest price review.

Research shows that the International benchmark price of fuel with high sulphur content is cheaper compared with fuel with sulphur content of below 10mg/kg.

Strait of Hormuz

“We are buying fuel, supposedly, from the countries that are aligned at the Strait of Hormuz. If we are getting fuel that does not meet specifications, where do you think that fuel came from? Was it surely from Saudi Arabia and Dubai (UAE) (where the companies in the G2G framework have their main operations),” said Cornelius Chepesoi, chairman Rig Owners Association 

“If the country was willing to lower the specifications of sulphur requirements to Kenya fivefold, do you know what that will do to our vehicles and our equipment? We will be stuck in the garage every day. The government has lowered the quality of fuel without reducing the price. So you will end up buying dirty fuel at a high cost.”

Our anonymous source noted that the prices that were announced on May 14 were based on the ultra-low sulphur standard of 10mg/kg or below. With the Kenyans now exposed to the high sulphur fuel, he notes that some players along the fuel supply chain stand to make “immense, illicit margins at the expense of motorists.’’