Kenya’s state Oil players rejected a new importation deal

NAIROBI, Kenya - Saudi Arabia and the United Arabs Emirates have both refused to use the state-owned - National Oil Corporation of Kenya to import fuel on credit due to its poor cash position.

This new development now forces president William Ruto's administration to allow the two countries to nominate their preferred oil dealers.

The move highlights the sway the three firms have on the government-to-government deal to import fuel on 180-day credit terms.
Adnoc picked Gulf Energy to supply diesel and jet fuel while Enoc picked the Kenyan oil marketer to import super petrol. Saudi Aramco picked Oryx and Galana.

The deal is meant to ease monthly demand for dollars and help prop the shilling which has been under pressure in the forex market since last year.
“They said that you (Kenya) cannot impose the counterpart importer on us, we have our preferred dealers whom we have been working with all along and those are the ones we will work with.” said a source.

Under Uhuru Kenyatta’s regime, Nock was picked at the beginning of August last year before the talks went mute amid talk that the Gulf oil majors had expressed their discomfort in working with the firm.

The discussions resumed when the Kenya Kwanza Alliance took office with the Energy and Petroleum Cabinet Secretary Davies Chirchir publishing a gazette notice that paved the way for the deal.

The three Gulf oil majors were given a free hand to choose their preferred Kenyan counterparts for the deal.

Local banks issuing letters of credit also flinched at the idea of issuing financial support to the cash-strapped State-owned fuel marketer, ultimately locking it out of the running for the deal.

Africa Export-Import Bank (Afreximbank), KCB, NCBA, Absa Bank Kenya, Stanbic Bank, and Co-op Bank, alongside the, were picked for issuance of the LCs to the local oil dealers who would clinch the deal with the Gulf suppliers.

The Nock-state-owned facility has been struggling to service $ 5 million loans taken from KCB Group and Stanbic. The lenders had in 2020 threatened to seize and auction assets of the oil dealer.

Kenya inked the deal with the Gulf majors early this month, paving the way for the first fuel on credit cargoes by mid-April.

Gulf Energy will import between 250,000 tonnes and 350,000 tonnes every month and between 170, 000 tonnes to 200,000 tonnes of diesel in the period.

The company will also import 80, 000 tonnes of jet fuel every month. Galana Oil and Oryx Energies will ship diesel cargoes of between 160,000 to 180,000 tonnes every month.

The deal will end after nine months after which Kenya may seek a fresh deal if the shilling does not recover from its woes.

GAROWE ONLINE