Four sue to stop govt-to-govt tenders for oil imports

MV Front Cheetah

MV Front Cheetah docks at Mombasa Port with more than 100 million litres of super petrol on April 7, 2022. Three Arab firms have won the tender to supply Kenya with petrol, diesel and kerosene for 9 months beginning April.

Photo credit: File I Nation Media Group

Four Kenyans have sued the government over plans to import oil through the government-to-government scheme.

Duncan Agesa Alugaya, James Ndirangu Ndururi, Duncan Mwenda Gichunge and Festus Kipkogei Kimei claim that the scheme is illegal and bad for oil importers.

In a petition filed at the High Court in Milimani Nairobi, the four allege that the tender of government-to-government "is a scheme that has been initiated by the Cabinet Secretary for Energy to monopolise the petroleum industry" at the expense of the oil marketers. They have named Oil Marketing Companies as interested parties in the suit.

They are challenging the regulations published by Cabinet Secretary for Energy Davis Chirchir to support government-to-government deals on fuel importation.

The government said such deals would carry benefits that were likely to trickle down to consumers in the form of lower pump prices. The deal will also ease pressure on the dollar.

The regulations, published in the legal notice no.3 of 2023 and gazette notice of December 23, 2022, will also see the country access favourable credit periods from suppliers.

"Recognising the need for (a) government-to-government arrangement for (the) importation of petroleum products which may enable the country (to) negotiate for discounts on product cost and freight while at the same time enabling the country to access extended credit periods from suppliers,” the rules state.

Pressures on Foreign Exchange Reserves

“This will save the country from the current pressures on Foreign Exchange Reserves.”

After the publishing of the regulations, the petitioners claim that an international tender was floated for the supply of petroleum products.

They say the tender is to exclusively award international suppliers a 100 per cent market share of all the petroleum products consumable in Kenya, "an issue that may pose a serious national security risk in case of a sabotage by the proposed supplier".

According to the petitioners, the tender documents and tender agreement dated March 1, 2023, have excluded any other marketing companies from participating in the bidding process.

They want the court to issue an interim order halting the government's plan pending the hearing and determination of the petition.

"The said legal notice introduced, (a) “government-to-government arrangement” as one of the would-be sellers/suppliers of petroleum products a departure from the legal notice no. 25 of 2012 (The Petroleum (Importation) Regulations, 2012) which only envisioned Oil Marketing  Companies being the importers of petroleum and petroleum products," the petitioners claim.

In addition, they say that the 2023 legal notice changed the criteria for eligibility to tender for the supply of oil products from an open tender system by oil marketer’s companies to a requirement of the tendering supplier being an authorised government entity which fact makes it difficult for any interested party to qualify as a government entity.

"The legal notice no.3 of 2023 – the Petroleum Regulation 2023 by its introduction of government to government arrangement as a way of importation of petroleum products within the open tender system violates the principles of procurement under the Public Procurement and Assets Disposal Act and in particular section 92 of the Act," the petitioners allege.

Confusion and contradiction

The open tender system is a restricted tender under the Act while (the) government-to-government arrangement is by (the) mere nomination of an oil marketing company as a supplier.

They are aggrieved that there is confusion and contradiction.

This is because the tender agreement of April 1, 2022, required the open tendering system to be done once every month (30 days) for the importation of petroleum products into the country.

They say the tender agreement of April 1, 2022, required that bidding would be done once a month and any of the members of the oil marketing companies would participate in the bidding every month, while the tender agreement dated March 1, 2023, requires the bidding to be done once every nine months (270 days).

This, they argue, eliminates the economies of scale that is brought about by the monthly bidding of the members of the Interested Parties hence monopolising the supply of petroleum products to government to government arrangement.

In addition, they say the initiative will benefit unknown nominees of the suppliers as the petroleum products prices are not discounted.

They have sued the Energy CS, Attorney-General and the Competition Markets Authority. The petition is pending hearing directions.