The Kenyan government has defended its Government-to-Government (G-to-G) petroleum importation arrangement, citing it as a crucial measure that prevented an economic crash. Energy and Petroleum Cabinet Secretary Opiyo Wandayi stated that the deal was conceived as an emergency response to acute US dollar shortages that threatened fuel supplies and broader economic stability. When President William Ruto's administration assumed office in September 2022, retail stations across the country were operating on minimal or depleted fuel stocks.
At the time, oil marketing companies (OMCs) had to settle petroleum import payments in US dollars within five days of receiving cargo, with the petroleum import bill requiring nearly $500 million per month. This consumed roughly 35% of Kenya's total import expenditure, forcing OMCs to scramble for currency across multiple commercial banks and rely on costly currency swaps. This situation fueled the rapid depreciation of the Kenya Shilling.
To relieve currency pressure, Kenya brokered the G-to-G arrangement in 2023 with three major state-backed firms: Aramco Trading Fujairah FZE, Abu Dhabi National Oil Company (ADNOC) Global Trading Ltd, and Emirates National Oil Company (ENOC). The agreement shifted fuel procurement to extended credit terms of 180 days, allowing Kenya to preserve foreign reserves. Under the framework, international oil companies chose licensed local counterparties to manage domestic distribution and logistics.
Initial counterparties included Gulf Energy Limited, Galana Energies Limited, and Oryx Energies Kenya Limited. As confidence in the system grew, the list expanded to include One Petroleum Limited, Asharami Synergy Limited, and BE Energy Limited. The ministry highlighted significant reductions in negotiated freight costs and premiums since the deal's inception, with Super Petrol's initial freight costs of $97.50 per metric ton easing to $84 per metric ton in March 2025.
Similar reductions were seen in Diesel and Jet A1, with initial costs dropping from $118 per metric ton and $114.25 per metric ton to $78 per metric ton and $97 per metric ton, respectively, by March 2025. CS Wandayi noted that these premiums have remained fixed, insulating local pump prices even during global supply shocks when spot market rates spiked above $400 per metric ton.
The government concluded that the arrangement successfully stabilized the Kenya Shilling, built foreign currency reserves, and cemented Kenya's status as a regional energy logistics hub for the Northern Corridor. Wandayi stated that the G-to-G arrangement has not only been a local solution to a local problem but has also received wide recognition and adoption regionally.
The government plans to continue working closely with trading partners in the region to make the Northern corridor the route of choice for the supply of refined petroleum to East Africa and the greater Lakes region. The deal has been hailed as a success, with the ministry stating that it has brought significant benefits to the country, including reduced costs and increased stability in the fuel market.
Key points
- The G-to-G arrangement has helped stabilize the Kenya Shilling and build foreign currency reserves.
- The deal has reduced freight costs and premiums for fuel imports, with Super Petrol, Diesel, and Jet A1 seeing significant cost reductions.
- The arrangement has cemented Kenya's status as a regional energy logistics hub for the Northern Corridor.
