The Kenyan Government says it has no intention of taking over the importation of petroleum products into the East African country as is being speculated.
According to the government, it is rather stepping in to facilitate long-term contracts with suppliers through their government on an extended credit period of 180 days instead of the current 30 days.
Last week, Ndegwa and Ndegwa Associates filed a suit on behalf of some oil marketing companies against the government’s planned nationalisation of petroleum products importation.
The nationalisation of oil imports “amounts to unfair practice as an unconscionable representation that is excessively one-sided” and favours the supplier rather than the consumer, the court documents said.
However, responding to queries filed by energynewsafrica.com, Mr. Daniel Kiptoo Bargoria, Director General of the Energy and Petroleum Authority of Kenya, argued that with the government’s proposed plan, payment of petroleum products would now shift from US dollars to Kenya shillings with an expected Letter of Credit (LC) maturity of 180 days instead of the 30 days.
In his view, the step being taken by the government would reduce pressure on the country’s USD liquidity.
Below are the queries and responses by the Director General of Energy and Petroleum Authority of Kenya Daniel Kiptoo Bargoria:
Question: Why has the Government of Kenya decided to import all petroleum products instead of allowing the private sector to continue with fuel importation?
Answer: The Government will not be importing the petroleum products but rather it has stepped in to facilitate long term contracts with Suppliers through their Governments on extended credit period of 180 days instead of the current 30 days.
Question: How is the gov’t sure that taking over the importation of petroleum products would address the forex crunch and ensure the availability of fuel?
Answer: First, the payment of petroleum products by Oil Marketing Companies under the Open Tender System (OTS) will shift from USD to Kenya Shillings with an expected Letter of Credit maturity of 180 days. This therefore reduces pressure on the country’s USD liquidity. The normal demand projection and import planning under the Open Tender System will continue and this will assure security of supply of petroleum products to the country.
Question: Did the gov’t arrive at this option because there is no other way to address the forex issue?
Answer: This option was found to be the best among the considerations that were made.
Question: Now that Ndegwa & Ndegwa Associates has filed a lawsuit against the gov’t, would the gov’t consider a different option or abandon the plan or it would still go ahead?
Answer: It’s hard to comment on this matter since it’s now before Court.
Question: In Ghana, there were forex issues and this drove fuel prices higher. What the gov’t considered doing was introducing a programme called ‘Gold for oil’, and in doing so, the government decided to use BOST to import 10 per cent of fuel importation and the Bulk Oil Companies (BDCs) are still doing 90 per cent. This has resulted in a decline in fuel prices. Would the Gov’t of Kenya revise its stance and go the way of the Government of Ghana? If not, what would the government do in the face of the legal suit?
Answer: The Government of Kenya will play a facilitative role in securing long term supply contracts with potential suppliers on extended credit terms. This will be facilitated through signing of Memorandum of Understanding with potential supplier Governments. Licensed Oil Marketing Companies will still import and pay for the products.
Further, the Petroleum (Importation) Regulations of 2023 allows for duality in the importation of petroleum into the country; i.e. through a Government to Government arrangement or through the current OTS process. Therefore, the current process has not been done away with and there’s room to revert.