Kenya defends local oil marketers amid Uganda's exploitation claims

What you need to know:

• Uganda President Yoweri Museveni said that middlemen in Kenya’s G-to-G had inflated the costs of the diesel, petrol and kerosene through high premiums.
• Uganda stopped relying on Kenya’s G-to-G deal in 2024 and rolled a similar deal with Vitol Bahrain, saying breaking away will help lower prices of fuel in Kampala.

Kenya has defended the local firms importing refined fuel under the Government-to-Government (G-to-G) deal, days after Uganda said the deal was captive to middlemen, resulting in costly fuel in Kampala.

Energy and Petroleum Cabinet Secretary Opiyo Wandayi on Sunday said that the three Gulf oil majors supplying Kenya with the fuel handpicked the local firms to deliver the fuel, adding that the deal would have collapsed had Kenya insisted on nominating the companies.

This comes days after Uganda President Yoweri Museveni said that middlemen in Kenya’s G-to-G had inflated the costs of the diesel, petrol and kerosene through high premiums and thus triggering steep prices in Uganda.

Uganda stopped relying on Kenya’s G-to-G deal in 2024 and rolled a similar deal with Vitol Bahrain, saying breaking away will help lower prices of fuel in Kampala.

Kenya inked the G-to-G deal with Aramco Trading Fujairah FZE (Aramco), Abu Dhabi National Oil Company (ADNOC) Global Trading Ltd and Emirates National Oil Company (Singapore) Private Limited (ENOC) to import fuel on a credit period of 180 days.

President William Ruto’s administration had said that the G-to-G deal will help cure the dollar shortage that had sent the shilling to record highs, triggering expensive imports and nearly grounding the economy.

“It is very important to appreciate that since the IOCs had not been parties to a transaction of this nature, especially from our region, early caution was therefore issued that based on the very high value of each transaction and the attendant performance risk, the choice of the counterparty was non-negotiable,” Mr Wandayi said on Sunday afternoon.

“Insistence by the Government on the choice of the counterparty would have therefore been a walk- away by the IOCs, effectively maintaining the status quo at such a critical time when the country’s supply faced imminent collapse. On request, the Government provided the list of all licensed OMCs to the IOCs for vetting.”

The three Gulf oil majors initially picked Gulf Energy Limited, Galana Energies Limited and Oryx Energies Kenya Limited as counterparties.

One Petroleum Limited, Asharami Synergy Limited and BE Energy Limited were added to the deal.

President Museveni cited the steep premiums for Kenya’s G-to-G deal, saying this was an avenue for middlemen in Kenya to steal from consumers in Uganda.

Uganda’s premiums with Vitol are $83 per tonne of diesel, $61.50 for the same quantity of petrol and $79.25 per tonne of jet fuel (dual purpose kerosene).

Kenya’s premiums are higher at $78 per tonne of diesel, $84 for the same quantity of petrol and $97 per tonne of jet fuel.

But fuel prices are higher in Kampala compared to Nairobi, raising questions about the impact of the lower premiums that Uganda agreed with Vitol.

A litre of diesel in Kampala is retailing at $1.694 compared to $1.673 in Nairobi, while a litre of petrol is going for $1.664 compared to $1.642 in Nairobi.

The shilling has weakened to exchange at a record low of 160 units to the dollar at the peak of the dollar shortage but has strengthened to exchange at 129 units, underscoring the impact of the deal.

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