Govt promises cheap fuel after after strike another oil deal with Gulf firms
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Kenya strikes cheaper fuel deal with Gulf firms after renegotiation in a bid to lower the cost of oil supplied on credit
Kenya strikes cheaper fuel deal with Gulf firms after renegotiation in a bid to lower the cost of oil supplied on credit.
To prevent consumers from missing out on the global decline in fuel, Kenya has reached an agreement with the three major Gulf oil companies to lower the price of the fuel supplied on credit.
The arrangement was reached last week, Energy and Petroleum Cabinet Secretary Davis Chirchir informed MPs on Tuesday, although he withheld information on the new surcharges that will be imposed for the remaining duration of the contract.
Kenya signed a State-backed deal with Saudi Aramco, Emirates National Oil Corporation (Enoc) and Abu Dhabi National Oil Corporation Global Trading (Adnoc) in April when crude prices globally stood at $81 per barrel.
The agreement was meant to ease pressure on the forex demand and help prop the battered shilling by delaying payments for six months besides allowing local firms to pay the three fuel importers in shillings.
“The suppliers were willing to bring down the premiums to allow us to get competitive. We were fairly successful in pushing for the reduction of the freight and premium and we will see improvement going forward,” Mr Chirchir told the Parliamentary Committee on Energy on Tuesday.
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Global crude prices have been on a sustained fall from April and hit $75 per barrel this month, but Kenya has missed out on the benefits of the drop due to the fixed contract signed under the deal to import fuel on credit.
Energy CS Mr. Chirchir did not disclose whether the new premiums will be reflected in the new prices that will be announced this Friday.
The deal has, however, failed to stop the slide of the shilling against the dollar. The shilling was exchanging at 141.2 units to the dollaron Tuesday, compared to 133.39 units in April when the first cargoes of the credit fuel arrived in the country.
Saudi Aramco, Enoc and Adnoc also agreed to remove the confirmation charge on the letters of credit that is calculated at the rate of 0.7 percent of the product and which has also increased the financing burden of the deal on the Kenyan government.
Mr Chirchir led a delegation in last week’s visit to Dubai, as the government sought to soften repayment terms of the credit fuel, barely two months to the first payment.
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