The government has concluded a deal with oil corporations from the Gulf to reduce the cost of the fuel being supplied on credit.
Energy and Petroleum Cabinet Secretary Davis Chirchir led a delegation to the Middle East to negotiate the deal following a drop in global crude oil prices and to negotiate repayment terms of the credit fuel the country receives from three Gulf oil corporations.
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At the end of March, Saudi Aramco, Abu Dhabi National Oil Corporation Global Trading (ADNOC) and Emirates National Oil Corporation (ENOC) won a bid to supply petroleum to Kenya through credit and signed a government-to-government deal that was to last nine months. Under the deal, the government was allowed to delay payments for a minimum of six months in order to ease the demand of the dollar that was weakening the shilling.
However, due to the binding nature of the deal, Kenya has missed out on the drop in global crude prices that has happened over the last few months. When the deal was struck the price of global crude oil stood at Sh11,643.35 ($82.46), according to the World Bank. As of June, the crude prices globally stood at Sh10,344.31 ($73.26).
“The suppliers were willing to bring down the premiums to allow us to get a competitive deal. We were fairly successful in pushing for the reduction of the freight and premium and we will see improvement going forward,” Chirchir said.
Kenya is expected to pay the first installment of the oil supplied on credit by the UAE companies in September. Unfortunately, this comes at the time that the Kenyan shilling continues to take a beating from the dollar — when the deal was struck the shilling was exchanging at over Sh132, currently the shilling is exchanging at Sh141.20.