‘Kenya did not sign any G-to-G contract with Saudi Arabia, UAE’ – Raila
Azimio la Umoja-One Kenya coalition party leader Raila Odinga has refuted claims that the Kenyan government signed government-to-government (G-to-G) contracts on oil supplies with Saudi Arabia and UAE.
In a statement on Wednesday, November 16, 2023, Raila said that instead, the Ministry of Energy and Petroleum signed a deal with state-owned petroleum companies in the Middle East, which the government characterised as a G-to-G.
The opposition chief said the characterization of the deal as G-to-G was meant to shield three Kenyan companies from paying 30 per cent corporate tax.
Raila says that despite the government promising that the deals would ease the cost of fuel and depreciation of the shilling against the US dollar, things have worsened instead.
"The cost of oil has not come down since the deal was signed. The shilling has continued to fall against the dollar. The scarcity of the dollar has continued. The landlocked countries that depend on us for oil are abandoning our pipeline because it has become too expensive. In other words, the deal has not addressed any of the problems Ruto said it would. When Ruto initiated this deal, the US-dollar to Kenya-shilling exchange rate was Ksh132. Today, six months later, it is Ksh159 to the dollar," Raila said.
"Well, the deal was a scam for which we now demand full disclosure and full accountability. It is corrupt and rotten to the core. It is state capture by Ruto and company and a conspiracy against the country. Ruto collapsing the country while feeding Kenyans on lullabies."
Raila said that three oil firms were nominated to handle local logistics, but are now selling oil to Kenyans at almost twice the price from bulk suppliers.
The opposition chief claims that one of the companies, supplying diesel to other oil marketing companies, was allowed to sell oil at prices that had been inflated by 17 per cent.
"This shady business model is being deployed by all the companies that were retained in the Ruto deal. They buy at low prices, delay in discharging, then ask to be allowed to offload at higher prices and the cost is passed to consumers," he said.
"The deal that Ruto hailed as phenomenal has resulted in high landed cost as a result of the structuring of the contract. The faults include the double counting of some cost elements and fixed freighted premium which sometimes are higher by up to $50 per metric tonne. The cost is passed to consumers."
Raila on demurrage costs
According to Raila, one of the companies, which manages 70 per cent of government importation has been experiencing serious challenges securing a Letter of Credit (LC). He says this is because the single bank that was picked to provide the LC is struggling with big bad loans. As a result, there is a delay in the clearance of importers to offload oil.
"Ships are queuing at sea for up to 18 days awaiting confirmation of LC in order to discharge while the Kenya Pipeline Company goes without operations for days because there is nothing to process. Then the companies incur demurrage, which is transferred to the consumer. Under the Open Tender System, demurrage costs are $45,000 per day for the biggest tanker (LR2) docking at the Port of Mombasa and $31,000 per day for the second-biggest vessel (LR1). Under the Ruto deal, demurrage has risen up to $70,000 per day. This cost is passed on to consumers at the pump," he explained.
The opposition is now calling on the government to immediately cancel the contract and revert to the Open Tender System.
"The open tender system was efficient, accountable and competitive and offered prices commensurate with international pricing model," he added.
He has also called on the Ethics and Anti-Corruption Commission to investigate the contracts signed by the government in the oil debacle.
"EACC and the Directorate of Criminal Investigations must investigate the tax compliance status and pricing model of the three oil companies. The Kenya Revenue Authority must come clean on the tax compliance status of the three oil companies and explain why they are being enabled to evade billions in taxes while ordinary Kenyans are being harassed for taxes," Raila stated.
Raila has also called on the government to make public the MoU between Kenya and Saudi Arabia and the United Arab Emirates.
"The Ministry of Energy and Petroleum must make public the deal it signed with the oil companies. The Ministry of Energy and Petroleum must make public the Supplier Purchase Agreement it signed with the oil companies," he added.