Malawi, Zambia now eye Kenya fuel import model
Malawi and Zambia, hit by fuel shortages, are in talks with Kenya to directly imports petroleum products from producers in the Gulf.
Malawi and Zambia, hit by fuel shortages back home, are in talks with Kenya amid consideration of replicating an arrangement where Nairobi directly imports petroleum products from producers in the Gulf.
Kenya in March ditched the Open Tender System (OTS) that has been in use for importing fuel for nearly a decade, in favour of direct procurement under a government-to-government(G-to-G) deal with Saudi Arabia and the United Arab Emirates (UAE).
“The countries have expressed interest in our G-to G deal and we had officials in the country last week. They are learning from us on how we structured our deal. Malawi also requested if it could get a berth at the port for fuel,” an official at the ministry of Energy said yesterday.
In the G-to-G deal, the three Gulf State-owned firms - Saudi Aramco, Abu Dhabi Oil Company (ADNOC), and Emirates National Oil Company (Enoc) – were given leeway to handpick Oil Marketing Companies (OMCs) to distribute fuel in Kenya on their behalf.
Gulf, Oryx and Galana were the local OMCs that were handpicked to distribute the fuel products to other oil companies for the duration of the deal.
Energy Cabinet Secretary Opiyo Wandayi last week unveiled a Kenyan team to guide their counterparts from Malawi on how to structure a government-backed fuel importation deal.
“I have today commissioned a technical team that will explain to the Malawian delegation the structure of the G-to-G arrangement, challenges experienced and the mitigation measures put in place to counter the challenges,” he said.
Malawi, Zambia and Burundi are currently grappling with a fuel shortage largely attributed to a combination of lack of dollars to pay for the product and freight inefficiencies. The fuel crisis has led to skyrocketing pump prices as marketers take advantage of the now scarce commodity to profiteer.
Countries use the dollar to pay for fuel imports, highlighting why absence or inadequate supply of the greenback can disrupt supply, crippling an entire economy. Top officials from Malawi and Zambia were in Nairobi last week for meetings with Kenyan counterparts on the prospects of adapting the model.
Kampala has already embraced the direct import model in which the Uganda National Oil Company (UNOC) buys the country’s entire fuel stock from Vitol Bahrain E.C before distributing it to OMCs in the country.
Kenya is currently importing fuel on a 180-day credit period, with the deal attributed to being key in propping up the shilling and stabilising it to the current exchange rate of 129.17 compared to the lows of 155.4 units towards end of last year.
The G-to-G deal has seen Kenya cut the demand of an estimated $500 million (Sh64.56billion) a month to pay for the imported fuel.
This is because only three local oil firms need dollars to pay for every cargo upon expiry of a grace period of 180 days. The rest of the oil firms pay the three marketers using the Kenyan shilling.
Kenya’s deal was initially set to lapse at end of last year but has since been extended further by a year.
