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- Jan 30, 2008
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Row as Sh106 billion Iran oil deal rejected
Irans President Mahmoud Ahmadinejad with President Kibaki at Jomo Kenyatta International Airport, Nairobi, last Tuesday when he arrived for a two-day state visit in Kenya
By BERNARD NAMUNANE
Posted Monday, March 2 2009 at 21:41
In Summary
A dispute has broken out after the government appeared to reject Sh106 billion worth of crude oil said to have been offered by Iranian President Mahmoud Ahmadinejad to Kenya.
Allegations were flying around on Monday that the government had rejected discounted Iranian oil, which could have saved the economy hundreds of millions of shillings.
But Energy permanent secretary Patrick Nyoike said Iranian oil was no good because after refining, half of it is useless residue.
During negotiations, Kenya had requested Iran for oil on soft terms 120-day credit on government-to-government concessionary prices.
A memorandum of agreement was signed granting 90-day credit, but mysteriously said nothing about cheaper prices, according to an industry source, who declined to be named for fear of antagonising the government.
We signed a deal that allows National Oil Corporation or any other company to get in touch with the Iranian Oil Corporation to get oil. We agreed on a figure of four million metric tonnes a year, Mr Nyoike said.
According to a usually reliable government source, some Energy ministry officials did not appear to favour the deal.
But another government source, who did not wish to be named discussing the controversial agreement, claimed price negotiations were going on.
Mr Ahmadinejad came visiting bearing goodies: A Sh400 million development grant, Sh400 million credit line, and an offer to build a factory to package Kenyan tea for re-export into Asia, among others.
That is what we (government) have been trying to strike for a long time because it could ease problems related with oil, said the government source, who accused two officials of the Energy ministry of turning down cheap oil.
There were two officials from the Ministry of Energy who made it clear that oil from Iran is bad. They were supported by a representative from the National Oil Corporation, he said.
The source claimed Mr Ahmadinejad had offered to supply two million barrels of oil a month at 10 per cent discount on the going market rate.
The Iranians had also offered to help build reservoirs to store up to a year of oil supply, the source said.
Stabilise market
But an oil expert who refused to be named for fear of endangering his position at work said Iranian oil was good and can be processed at the refinery in Mombasa.
Iran has two types of crude oil heavy and light which we process at the refinery, said the official. Already, 30 per cent of oil products used in the country originate from Iran.
Going by the current crude oil price of Sh3,552 ($44.40) a barrel, the government could have saved Sh8.8 million a month.
Such a deal also had the potential to stabilise the markets, where shortages and price increases have become frequent.
DAILY NATION - Row as Sh106 billion Iran oil deal rejected
