EPRA explains why National Oil, Kenya Pipeline were left out of G-to-G fuel deal

Speaking on Citizen TV's JKLive show on Wednesday evening, Eng. Kinyua said international oil suppliers declined to transact directly with unfamiliar firms, citing concerns over the risks involved in handling cargo worth millions of dollars.

“If I’m placing a ship worth 100 million dollars into the water and I don’t know my counterpart, what happens if anything happens to that cargo?” Eng. Kinyua posed, referring to concerns raised by global suppliers during negotiations.

He explained that the government had initially proposed the use of National Oil as the local counterpart under the G-to-G framework, but international oil companies rejected the proposal, insisting on working with firms they had existing relationships with.

This led to the nomination of private firms, including Oryx Energies, Galana Energies Limited and Gulf Energy Limited, with additional firms such as One Petroleum Limited, Asharami Synergy and Be Energy joining later.

Kinyua also clarified that Kenya Pipeline Company could not be part of the trading arrangement, as its mandate is limited to transportation and storage of petroleum products, not importation or commercial trading.

“Kenya Pipeline is not a trader; their work is transportation of petroleum,” he stated.

The EPRA director noted that the G-to-G deal was conceived as an emergency intervention after oil marketers faced a severe dollar shortage in 2022, making it difficult to import fuel under the previous open tender system.

He revealed that prior to the deal, over 145 oil marketers relied on accessing dollars to pay suppliers within five days of cargo arrival, a requirement that strained the foreign exchange market.

“The amount of money the private sector spends in terms of oil payment per month is to the tune of 500 million dollars,” Eng. Kinyua said, adding that the shortage had reached a crisis point.

According to Eng. Kinyua, the situation prompted President William Ruto to convene stakeholders, including regulators and industry players, to find a solution after being informed that dollar liquidity had dried up in the market.

He noted that the G-to-G model, which Kenya adopted as a first of its kind, has since attracted interest from other countries seeking to benchmark on the system.

The explanation came amid criticism from some leaders, including former Attorney General Justin Muturi and Kiharu Member of Parliament Ndindi Nyoro, who questioned the structure of the deal. 

Nyoro, who was also on the interview panel, alleged that companies benefited from the arrangement, claiming they take a share of the Ksh.17 per litre margins and additional gains from landed costs.

“The people profiting from G-to-G and the margins of oil in Kenya is Ksh.17 and they’re taking a slice of that and another from the landing cost. Those people are part of this government,” Nyoro claimed.

He further linked the inclusion of Be Energy in the deal to political developments, alleging it was added after the 2024 political truce as part of a reward system.

Despite the criticism, Eng. Kinyua maintained that the structure of the deal was shaped largely by the preferences and risk considerations of international oil suppliers.