President William Ruto's economic advisor David Ndii claims that Kenya could still benefit from the fallout with the East African countries who opposed its government-to-government (G2G) deal.
In response to queries by Kenyans over the recent move by Uganda to purchase oil from foreign companies directly rather than through Kenyan companies, Ndii explained that most of the oil will still be transported through the Kenyan pipeline.
As an international practice, Ndii added that a tariff charge will be imposed on the transits.
On the other hand, the transit of the oil products will also be recorded as a service export for the country.
"If Uganda and/or any other countries opt to import directly, the products will become transit goods. A transit tariff for the use of the pipeline will apply- this is standard international practice which will now be recorded in our Balance of payments as a service export.
"That figure is likely to be considerably higher than the financing cost savings," he expounded.
The response by Ndii came amidst concerns by economists who noted that the move by Uganda and other EAC countries would affect the country economically.
Led by economic expert Mohamed Wehliye, economists advised President William Ruto to work on a win-win formula for the countries so as not to back out of the Kenyan oil deal.
"Alternatively, we can negotiate with the foreign Oil Marketing Companies (OMCs) to give us two prices. One for domestic OMCs & the other for Airlines & foreign OMCs who buy oil in cash.
"We can't pass through our credit line costs to folks who pay in cash! We must sit & come up with a win-win regional G2G," he opined.
Most of the countries including Uganda, backed the Kenya oil deal because of the local companies who were acting as middlemen and selling fuel to the Uganda petrol stations at a profit.
Owing to the high prices set by the Kenyan companies, the cost of fuel in Uganda would automatically continue rising.
With the passing of the Petroleum Supply (Amendment) Bill 2023 by the Ugandan Parliament, Uganda will purchase the oil directly from foreign OMCs without going through Kenyan companies.
Uganda eyed Tanzania as its preferred alternative to Kenya, a move which the Kenya Pipeline Company (KPC) warned would be detrimental to the country's economy.
“The current supply logistics have made the cost of landing petroleum products in Kampala through the Northern Corridor Transit Route (NCTR) higher than the Central Corridor Transit Route (CCTR) road option by two per cent due to a reduction on freights and premium in the port of Dar-es-Salaam,” KPC warned that Kenya could lose up to Ksh2-3 billion per year.
