KCB Bank Kenya is planning to inject over Kes120 billion to support Oil Marketing Companies (OMCs) importing fuel as the regional lender seeks to consolidate its support to the energy industry.
The Bank has been facilitating oil imports into Kenya by financing the oil firms under its portfolio that have won business under the Open Tender System (OTS) through the Ministry of Petroleum and Mining.
This gives the OMCs a strongroom to import refined white oils from multinational oil suppliers for distribution across Kenya and the wider East African region.
The tenders financed include the importation of jet fuel, petrol and diesel products.
“KCB is a champion of regional trade, extending its services across the border of East Africa and beyond as a catalyst of the energy sector. We are working with the oil marketers to better support them to compete in the global petroleum market,” said KCB Group CEO Paul Russo.
Under the OTS system, the winning oil marketer imports the fuels on behalf of the other companies using the confirmed allocations; the other oil marketers are mandated to offtake their volumes upon arrival.
With the government indicating doing away with oil subsidies, the price of fuel in the country could rise in the coming months. Therefore, KCB’s contribution towards the stabilization of the prices in the short term will be vital.
The centrality of energy in the economy has been identified as a key driver of the development agenda with ripple effect in all sectors of the economy.
Since 2005, Kenya has been importing refined petroleum products through the Open Tender System — whereby the winning bidder solely imports the petroleum products and delivers them to the Port of Mombasa, where other oil marketers buy from the importer.
Importation of petroleum products through the OTS allows the oil marketing companies to access the oils at the same price and therefore levels competition in the market.
OTS is run through monthly tenders and entails sourcing of petroleum predominantly from the spot market, whereby petroleum is sourced from the open market without any prior contracts.
The industry recognizes that OTS is an effective supply system that creates a competitive and transparent means of availing the product to Kenyans through economies of scale.
KCB facilitates local and cross-border trading through operations and liquidity financing, as well as mitigating risks inherent in trade.