Crude oil is one of the world’s most important commodities and its price has ripple effects through the broader economy.
Locally-owned oil marketers in the transit business are pushing for a hybrid system of importing refined fuel, amid growing losses and a significant cut on their market due to the State-backed deal with Gulf oil majors.
Under their lobby, the Oil Tactical Exchange of Kenya (OTEK), they decried loss of the Ugandan market, which has left them with an oversupply given that their only two markets, South Sudan and Democratic Republic of Congo (DRC) cannot take all the product.
Kenya has since April 2023 been importing petrol, diesel and kerosene through a government-to-government (G-to-G)deal with Gulf oil firms. The system replaced the Open Tender System (OTS).
The exit of Uganda, (about 40 percent of the regional market) left the marketers with an oversupply forcing them to convert the product to the local market and sell at a loss, further squeezing their cash flows.
Some of the notable members of OTEK are Dalbit Energy, Nomad Petrochem and Acer Petroleum Limited.
OTEK alleges that the marketers, upon conversion of the transit fuel to sell it locally, are forced to dispose of it at a loss to lift their product at every import cycle.
Kenya is contractually required to import given volumes of fuel every cycle, exposing dealers in the transit market to the pressure of sourcing local markets.
“The government needs to come up with a system that combines OTS and the G-to-G, with the flexibility based on whether it is the season of high demand or low demand, largely factoring the regional markets,” Maurice Onyango, OTEK chair said yesterday.
“For example, when the regional market is disrupted in DRC due to heavy rains, OTS can be used because it will guarantee lower premiums that match the prevailing patterns.”
Additionally, OTEK says that the loss of market has forced them to keep fuel in Kenya Pipeline Company depots for longer, pushing them to incur increased storage costs.
The lobby, which was launched yesterday says that the government’s policy on fuel importation has left them on the edge financially, raising fears that most of them could be forced to shut down.
Kenya factored the Ugandan market while negotiating the G-to-G deal but the neighbouring country bolted out last year, leaving Kenya with excess fuel supplies for the transit market.
The G-to-G deal also has fixed premiums for the fuel, a clause which has denied local oil marketers and consumers relief at a time global prices of fuel have been falling.
Saudi Aramco, Abu Dhabi National Oil Corporation and Emirates National Oil Company supply Kenya with fuel on a credit period of 180 days.
Editor's Note: A story published in the Daily Nation on February 21, 2025 incorrectly stated that Dalbit Energy was a member of a lobby for local-owned oil marketers, the Oil Tactical Exchange of Kenya (OTEK). We regret the error and any inconveniences caused.
jmutua@ke.nationmedia.com
