Dealers want State deal to import UAE oil on credit blocked

Oil marketers have moved to court seeking to stop the planned importation of fuel on credit from the United Arab Emirates in a government-to-government deal that officials have said will ease pressure on dollar demand. 

The dealers through their lawyer Ndegwa Njiru say the plan by the government to pick a local oil marketer breaches the Open Tender System where marketers competitively bid for the tender.

The oil firms also allege that there was no public participation and stakeholder consultation before the gazettement of the Petroleum (Importation) Regulations, 2023, which is a breach of the constitution.

The imports, which will come through a credit of six months and a year, are expected to ease a crisis in the foreign exchange market given that oil shipments account for 28 percent of Kenya’s monthly imports.

“The tender documents and tender agreement dated March 1 2023 anchored therein have sought to exclude any other marketing company from participating in the bidding process thus violating Article 227 of the constitution of Kenya,” the dealers say in the petition filed on Wednesday.

“The 1st respondent (Energy and Petroleum Cabinet Secretary Davies Chirchir) has un-procedurally published legal notice no 3 of 2023, the petroleum (Importation) rules of 2023 and gazette notice no 15803 of 23rd December.”

Under the deal, the local firm nominated by the ministry will import fuel and other marketers forced to buy for the local market and transit to neighbouring countries.

Sources familiar with the matter say Abu Dhabi National Oil Company (Adnoc) — the State-owned oil company of the United Arab Emirates — will be supplying the fuel.

Adnoc is among the biggest oil companies in the world, with a production capacity of four million barrels per day last year. 

State officials have been guarded on how the shipment will affect fuel prices in Kenya amid concerns that the longer credit line could wipe out the benefits of buying diesel and petrol in large quantities.

Pump prices have remained unchanged since November, with a litre of super petrol retailing at Sh177.30 in Nairobi and diesel (Sh162 per litre), up from Sh106.99 and Sh96.40 respectively in February 2021.