Kenya has struck a deal with the three Gulf oil majors to lower the cost of the fuel supplied on credit to shield consumers from missing out on the global drop in fuel prices.
Energy and Petroleum Cabinet Secretary Davis Chirchir on Tuesday told lawmakers the deal was struck last week, but did not reveal the new premiums that will be charged for the remainder 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.
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.
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.
