The journey stretches thousands of kilometers from the Arabian Gulf, through the Strait of Hormuz, across the Indian Ocean, and on to the East African seabed. It is a long journey before the oil tanker finally docks at Kipevu Oil Terminal in Mombasa to discharge the precious cargo into the holding facilities of the Kenya Pipeline Company (KPC).
However, since April 2023, much of that chain has been governed by an arrangement unlike any Kenya had tried before; the Government-to-Government (G-to-G) oil import deal.
Understanding how fuel actually gets from a refinery in the Middle East to the forecourt of your local petrol station is a story spanning geopolitics, banking, infrastructure, and the everyday economics of running a nation.
The creation of a G-to-G deal
To understand the G-to-G arrangement helps to realize the crisis that made it necessary.
In 2022, Kenya experienced severe fuel shortages. Long queues snaked outside filling stations across the country, and the cost of petroleum imports was consuming a mounting share of the country’s foreign exchange.
In the first half of 2022, Kenya spent approximately Ksh.268.5 billion on fuel imports, averaging Ksh. 1.5 billion daily.
This represented a massive ninety-eight percent increase compared to the same period in 2021, driven by rising global oil prices. By mid-2022, high fuel costs were significantly widening Kenya’s current account deficit.
At the same time, the shilling was in freefall. By mid-2023, it had touched KES 166 to the US dollar, a historic low that made fuel imports even more expensive and threatened broader economic stability.
The situation was bad; a course change was inevitable, it was demanded! President Ruto’s administration responded by launching the G-to-G arrangement in March 2023, a multilateral state-level agreement that would transform how Kenya procured its petroleum to date.
Gulf giants at the centre of the deal
The Government of Kenya struck deals with three of the most powerful state-owned oil companies in the world.
Saudi Aramco, the Saudi Arabian national oil company and the world’s largest petroleum exporter, is headquartered in Dhahran.
Abu Dhabi National Oil Company (ADNOC), the UAE’s national energy company, is responsible for much of Abu Dhabi’s vast oil output and lastly the Emirates National Oil Company (ENOC), Dubai’s state oil company, that operates across refining, distribution, and retail.
These three companies were given contracts to supply Kenya with refined petroleum products: Super Petrol (gasoline), Diesel, Dual-Purpose Kerosene (used both for cooking and aviation), and Jet Fuel. The deal has since been extended multiple times.
Kenya’s Cabinet approved a further extension in December 2024, and in April 2025, the arrangement was renewed for another two years, meaning fuel shipments under the deal are contracted to continue into at least 2027.
Arrival at Kipevu Oil Terminal
For petroleum cargo, Kipevu Oil Terminal in Mombasa serves as Kenya’s industrial port.
From August 2022, the facility can accommodate up to three ships that simultaneously discharge petroleum into onshore storage tanks. When an oil tanker arrives, it is piloted into the terminal and connected to offloading pipes.
The fuel is pumped from the ship’s tanks into the Kipevu Oil Storage Facility (KOSF), a vast tank farm at the terminal that can hold over 326,000 cubic metres of refined petroleum products.
This facility is managed by Kenya Pipeline Company (KPC), the state corporation at the heart of Kenya’s downstream infrastructure.
Before the fuel is accepted, quality assurance checks are conducted. KPC’s quality assurance team tests each cargo for compliance with Kenya Bureau of Standards specifications — checking parameters such as sulphur content, octane rating, and fuel density.
Only fuel that meets these standards should be accepted into the storage system.
Moving duel inland
Once petroleum is safely in storage at Kipevu, it faces an uphill journey to Kenya’s hinterland and beyond where road tankers alone cannot efficiently move the volumes required. This is where Kenya Pipeline Company (KPC) becomes comes in, it is the backbone of the entire system.
Following recent Initial Public Offering (IPO), the Kenya Pipeline Company (KPC) formerly a wholly public owned entity, transitioned from 100% government ownership to a public-private structure.
The Government of Kenya retains a 35% stake, while local institutional investors hold 41%, and East African Community (EAC) investors hold 21.2%, with the remainder held by retail investors and employees.
KPC operates approximately 1,700 kilometers of underground pipeline running from Mombasa to Nairobi, Nakuru, Eldoret, and Kisumu. Fuel travels the pipeline in batches. A batch of petrol is followed by a batch of diesel, followed by kerosene, with the interface between products carefully managed to prevent excessive mixing known as “commingling.”
KPC operates five major storage and distribution depots at Mombasa, Nairobi, Nakuru, Eldoret, and Kisumu, with a combined storage capacity exceeding 417,000 cubic metres. It also operates aviation fuel depots at Jomo Kenyatta International Airport in Nairobi and Moi International Airport in Mombasa.
From depot to retail Station
Once petroleum arrives at a KPC depot, it is allocated to the various OMCs that have purchased it. Each Oil Marketing Company has its own storage allocation within KPC’s tank farms, and their volumes are tracked in real time.
From the depots, the petroleum is loaded into road tankers and driven to retail fuel stations across the country. For more remote areas such as parts of northern Kenya, Turkana, or the coast south of Mombasa, road trucking from the nearest KPC depot is the only option.
The Escrow Mechanism
Under the G-to-G deal is its payment structure, Kenya does not pay for fuel upfront in US dollars. Instead, it receives petroleum on 180-day credit terms. The shillings collected from domestic oil companies are deposited into escrow accounts managed by participating Kenyan banks.
Over the six-month credit window, these shillings are gradually converted into US dollars. After 180 days, the accumulated dollars are used to pay the Gulf supplier. The cycle then repeats for the next shipment.
This structure means that instead of scrambling for $500 million in hard currency every month, Kenya spreads the dollar demand over six months thereby easing pressure on the foreign exchange market.
Thereafter, the effect was visible; the shilling strengthened from Ksh.166 at its weakest to around KES 120 currently, and pump prices fell from a peak of Ksh.217 per liter of petrol to around KES 177 currently.
The Oil Marketing Companies (OMCs) approved to act as lead importers include Gulf Energy, Galana Oil, Oryx Energy, One Petroleum Ltd, and Asharami Synergy.
In 2026, with the escalation of conflict in the Middle East partially blocking the Strait of Hormuz, Gulf suppliers have adapted by loading fuel at alternative ports such as the port of Antwerp-Bruges in Belgium and Sikka port in India.
Economics of the G-to-G pricing
Under the G-to-G framework, the cost of fuel begins with the Free-On-Board (FOB) price, the prevailing international price for refined petroleum at the time of loading in the Gulf.
This is the additional freight costs which is the fee for hiring the tanker all the way to Mombasa from the Gulf.
Then another charge is the premium, an additional expense per barrel above the benchmark price. Next cost factor is the insurance for the cargo to destination.
Port and terminal charges also contribute to the expense ledger as is pipeline tariff charged by KPC. Next are the costs attributed to storage and distribution costs such as depot fees, road trucking expenses and dealer operating costs.
Lastly, the government levies and taxes including Excise Duty, Value Added Tax, the Road Maintenance Levy, and the Petroleum Development Levy, which, in Kenya as of April 2026, constitute a significant portion of the fuel price in Kenya, often exceeding 45% of the total pump price for super petrol.
Kenya remains vulnerable to external energy crisis shocks
Kenya has no strategic petroleum reserve. It has no national stockpile equivalent to the 90-day reserves maintained by OECD countries. The country relies on oil marketing companies to maintain only 15 to 21 days of operational stock. This means a sustained disruption to Gulf supplies easily translates into visible pump shortages within weeks.
Lessons from the 2026 crisis should shape reforms as analysts and policymakers call for the establishment of a genuine strategic petroleum reserve, a physical storage capable of buffering Kenya against supply disruptions for at least 60 days. There are also calls for diversifying the source countries for petroleum imports beyond the concentrated Gulf exposure, incorporating supplies from Nigeria or Angola in Africa, among other regions.
The next time the pump clicks and the petrol flows, that journey, measured in thousands of kilometers, hundreds of millions of shillings, and no small amount of geopolitical anxiety, will have been accomplished.
