Nock exclusion from Gulf oil deal angers legislators

Energy and Petroleum Cabinet Secretary Davis Chirchir

Energy and Petroleum Cabinet Secretary Davis Chirchir addresses participants at the Seventh Minigrids Action Learning Event at Safari Park Hotel in Nairobi last month.

Photo credit: Diana Ngila | Nation Media Group

MPs have protested at the exclusion of the State-owned National Oil Corporation of Kenya (Nock) from a multibillion-dollar deal to buy oil from gulf states, even as the first consignment is expected to arrive in the country next month.

Reacting to the uproar, Energy and Petroleum Cabinet Secretary Davis Chirchir explained that Nock is cash-strapped and indebted to the tune of Sh8 billion. He added that the entities awarded the lucrative contract had refused to deal with Nock.

It also emerged that, as a result of Nock being inactive, the country’s reserves for diesel and super petrol are low and the available stock as of Monday this week cannot last more than 21 days.

The National Assembly Departmental Committee on Energy on Wednesday also questioned why the government failed to compel the three entities awarded the contract to work with Nock as their local nominee.

The entities — Abu Dhabi National Oil Company, Saudi Aramco Trading Fjairah FZE and Emirates National Oil Company (Singapore) Limited — are from Saudi Arabia and the United Arab Emirates (UAE).

They have signed framework agreements with the Ministry of Energy for a government-to-government contract to supply Kenya with diesel and super petrol for the next six months.

During a meeting with the Committee at Panari Hotel in Nairobi, Mr Chirchir said Nock and the 85 oil marketing companies (OMCs) lacked the financial capacity to handle the deal. 

Mr Chirchir, however, stated that the OMCs were involved in the shift of the oil importation policy from an Open Tender System (OTS) to government-to-government contracts.

On reserves, he said: “The country is sufficiently stocked and adequate plans have been made to ensure a smooth transition to the government-to-government importation of petroleum with the first cargo under the arrangement expected in the first week of April”.

Though the products will be paid for in the Kenyan currency to safeguard dollar reserves, the CS said, in case of dollar appreciation or depreciation, the extra cost will be passed on to the consumer at the pump. 

He explained that, in the new changes, the oil will be imported on credit and the importers will be paid after six months on monthly basis.

Rising value

He added that the rising value and price of the dollar is because the US government is mopping up excess dollars in the market. He said the situation will stabilize in the next six months.

On the exclusion of Nock from the deal, Committee chair Vincent Musyoka alleged plans by “cartels” to bring down the agency and buy it at a throw-away price.

“But that won’t happen under the watch of this committee. Nock must be resurrected and we must renegotiate the debts,” said the Mwala legislator.