Since the government started oil supply contracts with Gulf-based firms in March 2023, Kenyan motorists have overpaid by about Ksh 16.4 billion, or Ksh 2.70 per litre of fuel.
The agreement with Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company replaced a previous open tender system where local companies competed to import oil.
Consultants from Channoil Consulting Ltd. and Kurrent Technologies Ltd. (engaged by Epra) have recommended ending the deal, citing higher costs compared to the open tender system.
The report reveals that local suppliers such as Galana Oil and Gulf Energy have not passed on the expected benefits, which has resulted in inflated returns compared to previous margins.
Under the government-to-government deal, the average supplier premium was Ksh 7.21 per liter, much higher than Ksh 4.51 per liter under the open tender system.
Kenya consumes about 380.1 million liters of fuel monthly, leading to a loss of Ksh 1.02 billion per month, or Ksh 16.4 billion, since the Gulf deal commenced.
Despite the deal’s intended management of dollar demand and reduction of supplier premiums, it has resulted in higher retail fuel prices.
The contract terms, which initially lasted 270 days from March 1, 2023, have been extended to the end of 2024.
