National Oil goes missing in action amid another crippling fuel crisis

The fuel crisis that the country has experienced in recent weeks has thrust the National Oil Corporation of Kenya (NOCK) into the spotlight, largely for what it has failed to do. 

Industry experts say Nock should have played a key role in steadying the supply of petroleum products in the country and in ensuring that consumers do not face shock price hikes like those that happened last week.

Politicos too note that it should have featured prominently in the Government-to-Government (G-2-G) framework that Kenya has with Gulf oil firms for the supply of fuel.

While NOCK largely remains a muted player in Kenya’s oil sector, national oil companies in other countries have emerged as key in securing the supply of petroleum products as geopolitical tensions disrupted supplies. 

Kenya has instead relied on private sector players to ensure that the country has access to petroleum products for both importation and local distribution.

This is to the extent that even when the government accused oil marketing companies (NOCs) of hoarding fuel, it appeared helpless, afraid to upset players, who, though they have obligations, the government can only push so far.

While there have been disruptions and even price hikes in neighbouring countries, they have largely avoided the shortages and queues at petrol stations witnessed in Kenya. 

In March, Tanzania, for instance, charged the Tanzania Petroleum Development Corporation (TPDC) with directly importing and distributing petroleum products, in addition to imports by other oil marketing companies. TPDC leveraged its role as a state agency to secure favourable deals. 

Uganda National Oil Corporation (UNOC) has also played a part in securing fuel supplies in Uganda through its partnership with Vitol, which ensured the country had consistent shipments of both planned cargoes and cargoes from alternative sources. 

UNOC has, in the recent past, appeared a stronger NOC in East Africa after it acquired a 22 per cent stake in the Kenya Pipeline Company (KPC).

UNOC has also clashed with Kenya’s Energy Ministry and the regulator, the Energy and Petroleum Authority (Epra), and has ultimately decided to end its decades-long reliance on Kenya’s fuel import system.

The country had felt sidelined when Kenya signed the G2G deal with Gulf oil companies and decided to go its own route, designating UNOC as its sole fuel importer in late 2023, cutting out oil marketing companies.

However, EPRA initially denied UNOC an import licence, citing failure to meet requirements such as having at least five retail stations in Kenya. Uganda escalated the dispute to the East African Court of Justice (EACJ) in December 2023. 

After months of tension and threats to divert all trade to Tanzania, the impasse was resolved in March 2024 through high-level diplomatic talks between Presidents Museveni and William Ruto, leading to UNOC finally securing its licence and commencing direct imports through KPC’s infrastructure. 

Martin Chomba, the chairman of the Petroleum Outlets Association of Kenya (POAK), pointed out the critical role that NOCK can play in stabilising fuel prices in the country, but also the security of supply of petroleum products.

“We need to make sure NOCK is so strong and can import cheap fuel in bulk such that when distributing fuel, they will force other companies to come to their level. But we have run NOCK down to the detriment of the common person and maybe to the advantage of some people,” he said, adding that NOCK, too, should have been the lead in building the country’s strategic oil reserves. 

Setting up the reserves, which are giant storage infrastructure that keep fuel acquired when prices are low, can help Kenya absorb shocks such as the one being experienced by tapping into fuel stored there to stabilise prices and also ensure security of supply.

“We do not have strategic oil reserves, and if marketers are left on their own to bring fuel the way they want, one day a major oil marketer might change tack and say they are no longer interested in that business. That would stop our economy,” he said.

“If we had oil reserves that would last us four or five months, it would not matter who disappears in the market because we would have energy. We just need policymakers in energy to make sure that we have reserves that would cushion us and strengthen NOCK to be the one that benchmarks petroleum prices in the country by being a major importer of cheap petroleum.”

NOCK, which was set up in 1981 and opened its first outlet in 1988, grew to control a 10 per cent share of the market around 2010.

The 2000s were marked by bullishness and rapid growth, with the corporation opening up new petrol stations but also acquiring some of the assets of BP, which was exiting Kenya then. 

It has, however, been run down to the point that it has a negligible market share and is grouped among the “others” in the latest analysis by Epra on who controls the sector. These are oil marketing companies that have less than one per cent market share.

The corporation had been primed for growth and even mandated with the importation of 30 per cent of the country’s petroleum needs. This quota was expected to see NOCK play a key role in securing supply and stabilising prices. 

This, however, was never to be, as the company experienced a period of rapid decline, weighed down by debts it had taken to expand, which later became a major burden, eventually defaulting on repayments, while a high interest rate saw the loan nearly double. 

The company’s losses deepened and reached Sh2.23 billion in the year to June 2024 from Sh1.66 billion in June 2023. The insolvency gap widened with liabilities exceeding assets by Sh11 billion. 

The firm has also suffered from exclusion from state deals that could have otherwise strengthened the marketer both as a strategic player and financially, including exclusion from the G-2-G deal that Kenya signed with Gulf oil firms in 2023. 

Former Attorney General JB Muturi narrated how he had expressed concerns about NOCK being left out of the G-2-G arrangement, noting that either the firm or KPC should have presented Kenya in the framework. 

“I raised the issue: if it is going to be a government-to-government, who is the government on the Kenyan side? Excuses were used, such as there being pressure on the Kenyan shilling because OMCs were demanding not less than Sh500 million every month to import fuel,” he said, further explaining that the campaigners for the G-2-G deal also made arguments about how the country would get a six-month window to pay for the fuel.

“Surprisingly, Kenya chose not to use the government-owned NOCK or KPC to represent the government on the Kenyan side, so that the equation makes sense when you talk about G-2-G. Kenya chose to advise the international oil companies to nominate private companies.”

Muturi also claimed that the companies that were nominated to handle business for the Gulf firms are owned by Kenyans in the government, including President William Ruto.

Similar sentiments were echoed by former deputy president Rigathi Gachagua, who demanded the cancellation of the G-2-G deal “framework, as it involves hand-picked oil marketing companies that represent Ruto’s interests, in any case, the commercial frameworks between William Ruto and private international companies.”

“This is not G-2-G. They are government companies in the Middle East but private companies in Kenya. In normal circumstances, if it were G2G, these companies would be working with either NOCK or KPC and not private companies,” he said.

In the government’s plans, NOCK occupies a central role, but implementation of these plans has always been pending. The Petroleum Ministry had in March 2022 proposed to restore Nock’s mandate to import a third of the petroleum products consumed in the country. 

Through the Petroleum (Importation) (Quota Allocation) Regulations, 2022, the Petroleum Ministry proposed that Nock be allocated a 30 per cent petroleum products quota for diesel, super petrol, kerosene and cooking gas.

This would ensure the company meets its mandate of stabilising both supply and retail prices. Nock was also expected to give priority to independent oil marketers, mostly small- and medium-sized firms that do not have affiliation with oil majors, when discharging products.

The smaller operators have, in the past, accused the major brands of unfairness by offering them products at unreasonably high wholesale prices that leave them with small margins at the pump. 

NOCK has, over the period, been on a decline, with some of the independents growing to be mid-tier oil marketers with market share bigger than that of NOCK.

More recently, NOCK has been planning to get into a Sh6 billion non-equity strategic deal with Rubis Energy Kenya. The plan received regulatory nods, but MPs raised concerns and suspended it.

Despite the seemingly underwhelming show by NOCK, it has been gobbling up billions of shillings from the Petroleum Development Levy Fund.

The kitty is funded by motorists who pay Sh5.40 per litre of super petrol and diesel, which is then used to cushion consumers when there are price shocks, but also used for petroleum development activities. 

An audit report on the PDL Fund shows that NOCK received almost Sh5 billion from the kitty in the financial year to June 2025.

According to the report by the Auditor General Nancy Gathungu, the state-run oil marketer spent Sh4.91 billion on recurrent activities and another Sh302 million on development activities.