Kenya explains controversial G-to-G fuel deal after Museveni’s revelations

The Ministry of Energy and Petroleum has explained how private oil companies became involved in the government-to-government (G-to-G) fuel importation arrangement, days after Ugandan President Yoweri Museveni questioned the use of middlemen in the supply of petroleum products to Uganda.

In a statement issued on Sunday, September 20, Energy Cabinet Secretary Opiyo Wandayi said the G-to-G arrangement was introduced in 2023 as a response to a severe shortage of US dollars that was threatening the country’s fuel supply and foreign exchange reserves.

The ministry said Kenya was facing a serious supply risk when President William Ruto’s administration took office in September 2022, with oil marketing companies required to pay for imported petroleum products in US dollars within five days of receiving cargo.

The petroleum import bill stood at about $500 million, accounting for approximately 35 per cent of Kenya’s total import bill at the time, according to the ministry.

The government subsequently entered into agreements with Saudi Aramco Trading Fujairah, Abu Dhabi National Oil Company Global Trading and Emirates National Oil Company Singapore on March 10, 2023.

The agreements allowed the companies to supply refined petroleum products to Kenya on 180-day credit terms.

According to the ministry, the arrangement was intended to ease demand for dollars, preserve foreign exchange reserves and reduce pressure on the Kenya shilling.

The ministry’s explanation comes after Museveni said Uganda had been buying petroleum products through middlemen in Kenya.

Speaking at the groundbreaking of a 320-million-litre petroleum storage terminal in Uganda on Thursday, September 17, Museveni said a Kenyan senator had alerted him that Uganda was purchasing fuel through intermediaries.

Ugandan officials subsequently compared the premiums paid under the previous arrangement with those under its current system involving Vitol and Uganda National Oil Company.

The figures presented showed the diesel premium falling from $118 to $83 per metric tonne, while the petrol premium fell from $97.50 to $61.50. The aviation fuel premium fell from $114.25 to $79.25.

The Kenyan Ministry, however, says the involvement of private oil companies was part of how the G-to-G arrangement was structured.

According to the statement, the international oil companies that had signed agreements with Kenya were required to either establish subsidiaries in the country to handle the entire supply chain or appoint licensed Kenyan counterparties to handle local logistics.

The international suppliers opted for the second option.

The ministry said the government provided the suppliers with a list of licensed oil marketing companies for vetting.

The first companies selected were Gulf Energy, Galana Energies and Oryx Energies Kenya. As the arrangement progressed, One Petroleum, Asharami Synergy and BE Energy were subsequently nominated.

The ministry said insisting that the government itself choose the counterparties could have led the international suppliers to abandon the arrangement, potentially leaving Kenya with the same supply and foreign exchange problems it was trying to address.

The ministry also provided a timeline of changes to the premiums paid under the G-to-G arrangement.

When the deal began, the negotiated freight and premium stood at $97.50 per metric tonne for petrol, $118 for diesel and $114.25 for Jet A1.

The ministry said the figures were renegotiated in September 2023, when petrol fell to $90 per metric tonne, diesel to $88 and Jet A1 to $111.75.

A further renegotiation in March 2025 reduced the premiums to $84 for petrol, $78 for diesel and $97 for Jet A1.

The government says those premiums have remained fixed even as international market prices increased sharply during the Middle East crisis.

These figures are particularly relevant to the controversy because they are the same initial premium figures that appeared in the comparison presented by Museveni and Ugandan officials.

However, the two governments are discussing different arrangements and the Kenyan Ministry's statement does not directly address why Uganda's comparison showed lower premiums under its current procurement model.

The ministry maintains that the central purpose of the arrangement was not simply to secure cheaper fuel but to address Kenya’s dollar shortage.

Under the arrangement, petroleum imports for the Kenyan market are paid for in Kenya shillings and backed by a 180-day letter of credit.

The government says this reduced immediate demand for dollars and helped preserve and build Kenya’s foreign exchange reserves.

The Ministry also said the number of banks issuing the letters of credit has expanded from KCB Bank to include MCB, I&M Bank, DTB, Stanbic, UBA and Equity Bank.

It described the arrangement as a local response to the economic pressures Kenya faced in 2022 and said it had helped strengthen the country’s position as a regional petroleum logistics hub.

The explanation comes as the Motorists Association of Kenya (MAK) calls for a forensic audit of the G-to-G petroleum procurement system following Museveni’s remarks.

MAK has demanded disclosure of the intermediaries involved, commissions, contracts, pricing formulas and beneficiaries of the arrangement.

It has also called for an independent review of the Energy and Petroleum Regulatory Authority’s pricing framework and the verification of the costs that ultimately feed into pump prices.

The association’s demands have placed renewed attention on how petroleum products move from international suppliers to Kenya and, in the case of regional exports, to neighbouring countries.

For now, the Energy ministry maintains that the private oil companies involved in the G-to-G arrangement were selected by the international suppliers rather than imposed by the Kenyan government.

The ministry has also defended the arrangement as a response to the dollar shortage that threatened fuel supplies in 2022, while Museveni’s account has raised questions about the cost of petroleum supplied to Uganda through Kenya.