Kenya’s energy regulator is managing consumer expectations after a review of fuel costs as a result of the renewed deal with State-owned Gulf companies, noting that the cost reduction was purely driven by market forces.

The Energy and Petroleum Regulatory Authority (Epra) says global crude oil prices keep fluctuating and this will impact the newly negotiated price reduction of up to 14 percent on petroleum products imported from the three firms — Saudi Aramco, Abu Dhabi National Oil Company (Adnoc) and Emirates National Oil Company (Enoc).

Epra director-general Daniel Kiptoo told The EastAfrican that the agreement allows each party to renegotiate prices.“It is a double-edged sword. The market keeps changing. We also have to keep adjusting. Prices go up, we go up, prices come down, we go down,” he said.“If geopolitics plays out as it did early last year, and there are missiles flying and driving up freight prices, what happens? Crude and metals are globally traded commodities, the prices are determined by market forces and geopolitical factors, and they keep oscillating.”Recently, the three Gulf oil firms agreed to cut petroleum prices by up to 14 percent per tonne in an extended fuel supply deal with Nairobi, signalling a relief for consumers at the pump.

In the new government-to-government (G2G) deal, Kenya is expected to buy a tonne of diesel from the three companies at $78, a drop of 11.3 percent from $88. A tonne of petrol will go for $84 from $90, while that of jet fuel will cost $75 from $111.75.

Uganda’s caseIn Uganda, in just 15 months, the government has surrendered its petroleum value chain to Middle East companies whose growing influence in the sector is poised to dominate other sectors, in what critics fear is the capture of the economy by powerful individuals using Gulf-based fronts.

The recent signing of an agreement with a Dubai-based investor to develop the $4 billion refinery handed the control of Uganda’s energy value chain to players from the Gulf, with the award last year of refined petroleum products supplies tender to Vitol Bahrain through a multimillion-dollar partnership with the national oil company.

Read: Inside Uganda’s $4bn refinery deal with UAE investorIn October 2023, Uganda came sprinting out of the blocks with an amendment to the Petroleum Supply Act that created a monopoly for the Uganda National Oil Company (Unoc) to source and supply fuel to more than 100 fuel dealers in the Ugandan market.

The law’s purpose was to ensure security of supply of petroleum products, improve fuel products stocking levels and contribute to the competitiveness of the consumer and retail pump prices. But experts say the law can be manipulated to give an advantage to market players.

Regional watchdog Comesa Competition Commission (CCC), which polices anti-trust business practices on the bloc, says Uganda’s dalliance with Vitol Bahrain, which owns oil marketing company Vivo Energy in the market, is a recipe for an abusive dominant position.“Vitol operates in the downstream market through Vivo Energy. To ensure that Vivo Energy is not given an unfair advantage over other OMCs [oil marketing companies], there is a need to ensure that it acquires the petroleum products from Unoc on the same terms and conditions as other OMCs,” said Willard Mwemba, the watchdog’s CEO.

He said that in a situation where Uganda lacks an independent national competition authority, the Vitol-Vivo relationship calls for scrutiny to ensure the local subsidiary does not gain an unfair advantage in Uganda’s downstream energy sector.

In August 2023, Unoc and Vitol signed a five-year supply deal, leading to an amendment of the law and handing the State-owned entity a monopoly, amid criticism over the secretive deal that was sealed swiftly.

Vitol Bahrain was brought in to fill the gap left by Kenyan private oil companies that were mandated to supply all the petroleum products to Uganda OMCs, but these were ousted after President Yoweri Museveni criticised the arrangement as “exploitation of Kenyan middlemen”.

Meanwhile, Kenya has extended the deal with the three Gulf firms to December 2027 for diesel, while the jet fuel and petrol deals will lapse in February and March 2028 respectively.

Under the deal which the Kenya adopted in March 2023 Kenya imports fuel from the three Gulf firms on a credit period of 180 days.

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