Republic of Kenya, Ministry of Energy Press Statement: Iran Oil Deal Not Rejected

Our attention has been drawn to the headline story titled "Row as Sh106 billion Iran oil deal rejected" that appeared in the Daily Nation on Tuesday 3rd March 2009.

The story makes very serious allegations based on hearsay and bordering on malice. In line with our core values to uphold transparency and accountability, the Ministry of Energy wishes to lay the facts clear as follows.

It is NOT true that the Ministry of Energy had rejected the offer to purchase crude oil from Iran.

Indeed during the state visit by the Iranian President, H.E. Mahmound Ahmadinejad last month (February 2009) the Minister for Energy, Hon. Kiraitu Murungi and his Iranian counterpart signed a memorandum of Understanding for supply of four (4) million metric tons of Iranian crude oil per annum.

The signing was preceded by an analysis of economic comparison between Iran light and Murban as well as Iran Heavy and Arab Heavy.

The comparison is as follows

Crude type: Iranian light
Cost of crude oil and processing fess -100 tons in Ksh: 2,831,071
Value of products in Ksh: 3,245,948
Delta in Ksh: 414,246

Crude type: Murban
Cost of crude oil and processing fess -100 tons in Ksh: 3,086,635
Value of products in Ksh: 3,432,675
Delta in Ksh: 346,040

Crude type: Iranian Heavy
Cost of crude oil and processing fess -100 tons in Ksh: 20,702,223
Value of products in Ksh:3,030,143
Delta in Ksh: 327,919

Crude type: Arab medium
Cost of crude oil and processing fess -100 tons in Ksh: 2,670,187
Value of products in Ksh: 3,047,809
Delta in Ksh: 377,622

It is clear from the above analysis, the gross margin for Iranian light at Ksh414,246 is better than for Murban crude oil at Ksh346,040 by Ksh68,206 for every 100 tons of Iranian light crude oil processed. This translates to Ksh682,060,000 for one million tons.

Kenya made a request to Iran to be allowed to import crude oil through the Kenya National Oil Corporation and indeed other Kenyan companies at concessionary terms amounting to 10% below the market price. This request was not granted by Iran on the grounds that their law and Government have no provision for supply of crude oil below the official selling price and hence Kenya has to import Iranian crude at the prevailing official selling price.

Iran however, agreed to consider granting Kenya a 90-day credit period for payment of crude oil lifted. Kenya had requested for 120 days credit terms. Kenya will pursue further discussions on the Iranian oil import.

Iranian crude oil is not waxy as alleged in the story and had in the past been processed by the Kenya Petroleum Refineries (KPRL) in large quantities.

Energy matters are spearheaded and supported by the Ministry of Energy and it can therefore not be said that Ministry officials were opposed to the Iran oil deal.

It appears that the story was published with ulterior motives where facts were misrepresented to give slanted information.

We would like to state that as a Ministry we are open to consultation and dialogue but we also wish to state categorically that we will not run the affairs of the Ministry through the press.

Ministry of Energy
4th March 2008

Bookmark the permalink.