The Ministry of Energy and Petroleum in Kenya has dismissed allegations of foul play in the importation and supply of refined petroleum products under a Government-to-Government arrangement. According to Energy Cabinet Secretary Opiyo Wandayi, the deal was made in 2023 to address a severe US dollar shortage that threatened to destabilize the economy and deplete foreign exchange reserves. The arrangement allowed for extended credit terms of 180 days with suppliers.
In 2022, Kenya faced significant challenges due to a shortage of US dollars, which complicated the supply of refined petroleum products and other critical imports. At the time, all imports of refined petroleum products were paid for in US Dollars within a short period of 5 days after cargo receipt, amounting to US Dollars 500 million, which was about 35% of the total import bill. This situation prompted the government to broker an importation deal with Aramco Trading Fujairah FZE, Abu Dhabi National Oil Company Global Trading Ltd, and Emirates National Oil Company.
The International Oil Companies (IOCs) involved in the deal opted to appoint licensed counterparties in Kenya for local supply logistics. The government provided a list of all Oil Marketing Companies (OMCs) for vetting, and initially, Gulf Energy Limited, Galana Energies Limited, and Oryx Energies Kenya Limited were selected. As the arrangement progressed, more OMCs were onboarded, including One Petroleum Limited, Asharami Synergy Limited, and BE Energy Limited. This expansion was made possible as the transaction was de-risked, leading to higher confidence by the IOCs.
The freight costs for the supply of Super Petrol, Diesel, and Jet A1 varied over time. Initially, the costs were USD 97.50 per metric ton for Super Petrol, USD 118 per metric ton for Diesel, and USD 114.25 per metric ton for Jet A1. However, as market conditions eased in September 2023, the freight costs decreased to USD 90 per metric ton for Super Petrol, USD 88 per metric ton for Diesel, and USD 111.75 per metric ton for Jet A1. Further renegotiation in March 2025 resulted in even lower costs.
The government's importation deal has had a positive impact on Kenya's economy, particularly in preserving forex reserves and stabilizing the US Dollar - Kenya Shilling exchange rate. CS Wandayi lauded the deal, citing its role in mitigating dollar liquidity challenges. However, the arrangement has faced controversy, particularly after Uganda's President Yoweri Museveni revealed that Uganda was procuring petroleum products at exorbitant rates through middlemen in Kenya.
President Museveni's revelation came during the groundbreaking ceremony for a 320-million-litre petroleum storage terminal in Uganda on September 17. He stated that he was unaware of the middlemen involved in Uganda's petroleum procurement until a Kenyan Senator alerted him. As a result, Uganda decided to end the arrangement. According to figures cited by Museveni, Uganda was paying a premium of $118 per metric tonne for diesel under the previous arrangement, compared to $83 under its current arrangement.
The controversy highlights the complexities and challenges involved in Government-to-Government deals, particularly in the energy sector. Kenya's Ministry of Energy and Petroleum has sought to clarify the terms of the deal, emphasizing its efforts to address dollar liquidity challenges and stabilize the economy. The impact of the deal on Kenya's economy and the region's energy landscape will continue to be monitored.
Key points
- The Kenyan government brokered a deal with Aramco Trading Fujairah FZE, Abu Dhabi National Oil Company Global Trading Ltd, and Emirates National Oil Company to supply refined petroleum products on extended credit terms of 180 days.
- The deal helped alleviate dollar liquidity challenges and stabilize the US Dollar - Kenya Shilling exchange rate.
- The arrangement faced controversy after Uganda's President Yoweri Museveni revealed that Uganda was procuring petroleum products at exorbitant rates through middlemen in Kenya.
