Oil & Gas

Kenya has officially extended its oil import agreement with three Gulf state-owned oil companies—Saudi Aramco, Emirates National Oil Co., and Abu Dhabi National Oil Co.—by another 24 months. The deal, which allows fuel imports on a 180-day credit basis, has also been renegotiated for lower freight and premium costs. According to Energy and Petroleum Regulatory Authority (EPRA) Director-General Daniel Kiptoo, the new contract will begin toward the end of the year once existing import schedules are completed.

The revised terms include an 11% drop in diesel costs to $78 per metric ton, 7% off gasoline to $84, and 13% off jet fuel to $97 per metric ton, all pegged to S&P Global Platts benchmarks. This arrangement saves local oil marketers from sourcing foreign currency for imports, easing pressure on Kenya’s forex reserves and supporting the Kenyan shilling. Kiptoo noted that while Uganda's independent sourcing has slightly reduced volumes, Kenya remains a key fuel hub for countries like South Sudan, the Democratic Republic of Congo, and Burundi, with Rwanda also in talks.

Interestingly, the extension comes despite earlier signals from Kenya’s Treasury to the IMF that the country would exit the deal due to foreign exchange market distortions. The Treasury had cited risks tied to rolling over private financing facilities and reaffirmed its long-term commitment to market-based energy solutions. Kiptoo acknowledged those concerns but emphasized that abandoning the plan would reintroduce monthly forex burdens for maturing payments and new spot market purchases.

The original agreement, introduced in 2023, replaced the open tender system that required about $500 million in upfront payments every month. “The plan is very flexible; we can change the volumes if there’s additional demand both domestic and from partners,” Kiptoo added, highlighting its adaptability to regional market shifts. As Kenya positions itself as a regional fuel hub, the extended credit-based arrangement appears to serve both economic stability and geopolitical influence in East and Central Africa.