National Oil Corporation of Kenya which is owned by the Kenyan government will from August 2022 begin to ship fuel from Saudi Arabia as it has significantly lower prices than the current global oil prices. The decision by National Oil Corporation of Kenya is being viewed as the Kenyan government’s strategy for reducing the current pump prices in the country.
The shipping will be facilitated via a government to government deal that will make it possible for Saudi Aramco officially known as the Saudi Arabian Oil Company, to supply the National Oil Corporation of Kenya with refined fuel at prices that are exclusively lower than the current prices present globally.
With the new deal, National Oil Corporation of Kenya will be importing thirty (30) percent of Kenya’s total petroleum requirements every month from August of 2022. It is believed that this will aid in the reduction of the current pump prices and as a result, reduce the financial pressure on consumers.
National Oil Corporation of Kenya has revealed that it has signed an MoU (Memorandum of Understanding).
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The Chief Executive Officer (CEO) of the National Oil Corporation of Kenya; Leparan ole Morintat stated that, “We already signed the MoU and the next phase is negotiating the contract terms, we are waiting on them as from last Sunday.”
The Chief Executive Officer (CEO) added that, “The plan is to start trials in August, for two months and see the impact of the exclusive prices that Saudi Aramco will be giving us. Then we will fully start in October.”
While the time span for the contract is still not known, it is expected that the National Oil Corporation of Kenya will be rebuilding its network across Kenya.
Saudi Aramco or the Saudi Arabian Oil Company, will be financing the shipments or be providing the product with an extended credit timeframe after which the National Oil Corporation of Kenya will then pay within a sixty (60) day and ninety (90) day period.
It is believed that the fuel imports will also be used to bestow the country with stocks that are strategic, while also protecting it from the fuel shortages brought on by production difficulties which continue to occur worldwide.
Saudi Aramco or the Saudi Arabian Oil Company will through the help of financiers based in Dubai, cater for the financing of the commodity. It is predicted that the deal help the National Oil Corporation of Kenya unlock more affordable credit for the purchasing and shipping of Kerosene, Super, and Diesel.
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Saudi Aramco, is the largest oil company in the world and is owned by the Saudi government. It has a major presence in the North American market, Asian market, and the European market.
The Saudi Arabian public petroleum and natural gas company became a publicly listed company in 2019 through the sale of a 1.7 percent stake majorly to the regional institutions and public institutions in Saudi Arabia.
The East African nation of Kenya has been experiencing sky high pump prices in recent times. One (1) litre of Diesel in Nairobi now retails for 140 Kenyan Shillings, Super goes for 159.12 Kenyan Shillings per litre and Kerosene goes for 127.94 Kenyan Shillings per litre.
The record high pump prices have been as a result of a corresponding increase in the cost of Crude Oil worldwide through the production and supply hiccups brought on by the still ongoing Russia and Ukraine war. This led to the National Oil Corporation of Kenya needed to strategically stock up on fuel so as to ensure that the pump prices in Kenya, are reduced.
In March and April of 2022, Kenya experienced a major fuel shortage after the major players opted to increase the percentage of fuel sold to neighboring countries from forty (40) percent of total imports to sixty (60) percent in a bid to aid with liquidity.
Although the National Oil Corporation of Kenya was set up to positively influence and stabilize the fuel prices, it has now had to follow what has been dictated by private establishments in the market.
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While the National Oil Corporation of Kenya initially had the mandate of importing thirty (30) percent of the country’s entire petroleum products including of course, cooking gas. It sadly lost the rights after the Kenyan government opened up the importation market to private companies back in the 1990s.
It is believed that the deal between Saudi Aramco and the National Oil Corporation of Kenya will help the petroleum company at a time when it has experienced a number of losses which have negatively affected its ability to be at par with its competitors like Rubis Energy, Vivo Energy and TotalEnergies.
Rubis Energy controls 10.73 percent of the petroleum market in Kenya, TotalEnergies controls 17.7 percent of the petroleum market and Vivo Energy Kenya controls more than a third (3rd) of the country’s petroleum market at 26.52 percent. The National Oil Corporation of Kenya currently controls 2.2 percent of the market.
Although the National Oil Corporation of Kenya had more than a hundred (100) filling stations all over Kenya, it had to close a number of them down and lease others out as a result of low funding from the National Treasury combined with the competition from other local companies as well as multinationals.
The deal between the National Oil Corporation of Kenya and Saudi Aramco is being backed by the Draft Petroleum (Importation) (Quota Allocations) Regulations, 2022 which is looking to further improve the finances of the establishment.
The Draft Petroleum (Importation) (Quota Allocations) Regulations, 2022 have been scrutinized by the public and it is believed that could move things in favour of the National Oil Corporation of Kenya and essentially help it gain more market share as well as a competitive advantage.
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