A Kenol service station near the UN headquarters has been re-branded Rubis, the European company which recently acquired the assets of Kenol and Kobil and understandably those of Gulf Petroleum. Indeed, this will be a major rebrand exercise which will see a simultaneous end of three local brands. This article attempts to record the early history of Kenol/Kobil before it is permanently erased by the acquisition.
Kenol was incorporated and listed on the Nairobi Stocks Exchange (NSE) in late 1950s by Sir Reggie Alexander, a pre-independence colonial politician of Israeli origin. In 1979, the company, with a market share of about three, embarked on a major market expansion programme. To expand its products supply base, Kenol entered into a crude supply and refining agreement with Esso Oil Company (where I was the Supply Planning Manager).
In the course of the year 1980, Kenol experienced massive working capital constraints resulting from high costs of financing crude oil at a time when global prices had more than doubled following the 1979 US/Iranian political crisis. To safeguard its interests, Esso put Kenol on stop forcing Kenol to close business with its bankers immediately placing it on receivership which was to last until 1982.
The 1979 Iranian oil crisis had severely hit Kenya. The government delayed increasing consumer prices to recover high import costs, with the oil marketers threatening to delay oil imports until price increases were granted. The government called this blackmail by multinationals and immediately undertook a series of institutional and regulatory actions in the oil sector to ostensibly guarantee security of oil supply to Kenya.
Operationalisation of the Ministry of Energy, which had been formed in 1980, was fast-tracked. In 1981, the National Oil Company of Kenya (NOCK) was formed through an executive order with the key mandate to import 30 percent of all Kenya oil requirements to be allocated to the other marketers. The oil procurement process was not prescribed in any regulation.
In early 1982, Gad Zeevi, the Israeli owner of HZ Construction (and Yaya Center) together with powerful political leaders from the Rift Valley, bought Kenol from receivership, re-opened the service stations, and within months Kenol was supplying fuels to most of the government ministries, the military, and part of Kenya Airways jet fuel. More significantly Kenol was “assisting” NOCK to procure the 30 percent oil import quota.
In 1983, as the oil sector experienced hardships, Mobil Oil Company decided to leave Kenya. Mr Zeevi and his political partners bought the company, replaced the “M” in Mobil with “K” to create Kobil, and registered it as an offshore company in Delaware, US. Kobil became the “truly” offshore counterpart company that would source the 30 percent oil for NOCK in addition to supplying local Kobil affiliate and Kenol which operated under one management.
This is when the late Nicholas Biwott (who was rumoured to be a major owner of Kenol/Kobil) became the Minister for Energy which regulated the oil sector. This became a perfect case study of blatant conflict of interest, abuse of power and public office, and economic capture of the oil sector by a political group. By mid-1980s, the government mysteriously and unceremoniously expelled Mr Zeevi from Kenya, leaving control of Kenol/Kobil under the local political group.
As long as Kenol/Kobil was in business, there was no intention by the government to let NOCK grow into a significant marketer. NOCK was essentially a conduit for Kenol/Kobil to procure 30percent of Kenya oil imports. Only a retroactive forensic audit of NOCK imports in 1980s can establish the extent of suspected financial losses by the country and the public.
When the Kibaki government came in 2003, Kenol/Kobil lost political influence, and the owners apparently embarked on a strategy to “sell and run”. In 2007 the offshore Kobil was registered in Kenya, and quickly merged with Kenol to form KENOL/KOBIL which was listed on the NSE for the public to buy a now “fully cleansed” entity, and later for Rubis to acquire all the shares, thus completing the divestment journey.
We welcome Rubis into the Kenyan market, and hope that they remain aware of the historical background surrounding the origins of their new assets.