Newsbase - Africa Oil & Gas Subscribe to download Archive

Kenyan opposition leader slams fuel import deal with Arab nations as "grand scam"

Objections have arisen to Kenya’s government-to-government petroleum products importation deal with the main opposition leader calling it a “grand scam” while the government insists it has saved the economy.

Raila Odinga, leader of Azimio la Umoja–One Kenya Coalition Party, issued a scathing attack on the administration of President William Ruto over the deal, which he charges has created a breeding ground for corruption and failed to meet the stated goal of stabilising domestic fuel prices.

Kenya signed the deal with the Arab oil majors, namely Saudi Aramco, Emirates National Oil Company (ENOC) and Abu Dhabi National Oil Company (Adnoc), to supply petroleum products on deferred payment arrangements.

The plan was expected to alleviate demand for US dollars driven by petroleum imports by extending the time required to source for dollar liquidity from the current five days to 180 days.

With petroleum imports accounting for 30% of Kenya’s total dollar requirement, this meant the East African country would not be under pressure to source for $500mn every month.

However, Raila has castigated the arrangement stating there was no government-to-government contract and that what was in fact signed was an agreement between the Ministry of Energy and Petroleum and state-owned petroleum companies in the Middle East.

“Why Ruto chose to characterise the deal as a G-to-G [government-to-government one] is the first red flag that points to mischief,” Raila said in a press statement.

He further charged that the deal was not aimed at supplying oil on favourable terms but aimed to shield the three Kenyan companies, namely Gulf Energy, Galana Oil Kenya and Oryx Energies Kenya, from paying 30% corporate tax. The three companies were nominated to handle local logistics.

Despite the push by the opposition leader for the cancellation of the arrangement, the government through the Energy and Petroleum Regulatory Authority (Epra) maintains that the plan has protected the economy from exchange rate volatility.

“The arrangement with Gulf oil firms has eased pressure on the shilling with a reduction in depreciation against the US dollar from a high of 3% per month to a percentage,” media outlet The Star quoted Epra director general Daniel Kiptoo as saying.

He added that at least 42 cargos have been delivered under the government-to-government arrangement, assuring security of supply while 13 letters of credit worth $1bn have since been paid under the plan.