State to effect new G-2-G rates next week after re-negotiations

MOTORISTS and industries in the country are set to benefit from lower fuel pump prices after the government successfully re-negotiated the refined petroleum products import deal with the Gulf.

This is on the back of a much stable shilling which has rallied to a six-month high against the US dollar to stabilise at an average Sh129 in the past three months, making imports cheaper compatred to same period last year.

Petroleum PS Mohamed Liban yesterday told the Star the new rates will be effected next week even as the government mulls how to pass benefits of the low global prices to consumers as taxes remain the biggest headache.

Under the re-adjusted prices, the three Gulf oil producing companies in the contract have slashed freight and premium margins by between $6(Sh778) and $14.75 (Sh1,913.15) per tonne on three products–diesel, super petrol and jet A1, with the exception of kerosene.

Oil Marketing Companies importing products for the Kenyan market will now lift a tonne of diesel from Abu Dhabi National Oil Company at $78 (Sh10,117) down from $88 (Sh11,414), a huge fall from the initial master framework agreement of $118 (Sh15,305) per metric tonne. Jet A1 (aviation fuel) from the same company will now cost $97 (Sh12,581) per metric tonne, down from $111.75 (Sh14,494).

Emirates National Oil Company on the other hand has agreed to lower the margins for super petrol to $84 (Sh10,895) from $90 (Sh11,673) per tonne while Aramco Trading had adjusted downwards it prices for diesel and petrol from $88 (Sh11,414) to $78 (Sh10,117 ) and $90 (Sh11,673) to $84 (Sh 10,895) per tonne, respectively.

“We are doing some analysis to see how best we can pass benefits, including the low global prices to the local consumers. We plan to effect the new lower tariffs next week,” Liban said.

Kenya will continue importing products on a 180-day credit period with the government also having renegotiated the deal changing it from a fixed period to defined volumes.

The country failed to meet the contract terms on volumes after Uganda’s exit from the deal last year, when Uganda National Oil Company (UNOC) assumed the role of the sole importer of petroleum products for the Ugandan market.

This sent Kenya back to the drawing board forcing it to extend the deal, initially meant to last for nine months from March 2023, to December 2024.Cabinet further extended the deal to December 2027 for diesel imports, February 2028 for JetA1 and March same year for petroleum products.

The government has been negotiating for lower rates in line with falling global prices.

“The international oil companies agreed to GOK’s request for review of the freight and premium considering the long-term relationship,” official documents indicate.

G-2-G was meant to help stabilise the shilling which was on a free fall, hitting Sh168 to the dollar last year. It helped end the monthly demand of over $500 million that oil dealers needed to pay for fuel on the spot markets, under the former Open Tender System.

The fuel is imported on six-month credit by local selected Oil Marketing Companies backed by commercial letters of credit (LOCs) issued by domestic banks and confirmed by international banks.

The Petroleum Institute of East Africa (PIEA) supported the deal, saying it has eased demand for the dollar, as dealers are paying for supplies in Kenyan shilling.

Petroleum products imports account for 30 per cent of Kenya’s total dollar requirements. After Kenya and Uganda, Malawi, Zambia and Rwanda have also considered G-2-G deals for their imports.