On 20 November 2018, a dispute over jet fuel supply, pricing and licensing landed before the National Assembly after Gulf Oil and Kenya Airways fell out over a contract for the national carrier’s fuel needs.
The row began when Gulf Oil sought to revise the price of Jet A1 fuel it was supplying to Kenya Airways, asking for an increase of Sh5 per litre after changes in the international market. Kenya Airways rejected the demand and told the National Assembly’s Committee on Energy that it would not accept a mid-contract price hike on an agreement signed in November and meant to run for one year.
Chief Finance Officer Hellen Mwariri said the airline resisted what she described as “arm-twisting ways.” She told the committee, chaired by David Gikaria, that Gulf Oil later withdrew its services after the disagreement.
According to Kenya Airways, Gulf Oil had been contracted to provide 35 per cent of the airline’s fuel requirements, equal to 336 million litres of jet fuel this year. Mwariri said the airline moved quickly to avoid disruption and brought in Oil Libya for 15 per cent of the volumes, while ASM took the remaining 20 per cent. She said Kenya Airways then ended future dealings with Gulf Oil after what she called blackmail.
Gulf Oil responded by petitioning Parliament and raising questions about how airlines choose fuel vendors. In its complaint, the company alleged that ASM and Pacific Oil lacked the necessary clearance from the Energy Regulatory Authority, making their business with airlines unlawful. Gulf Oil also claimed ASM had no physical offices in Kenya.
ASM, which supplies Kenya Airways, was described as a hosted company operating through a “hospitality contract” with Kenol Kobil. In that arrangement, a marketer without major infrastructure such as storage tanks or fuel stations partners with a larger player to meet client demand and share profits. Mwariri countered the allegation by producing an ERC clearance certificate for ASM and said Gulf Oil’s petition was driven by malice after losing business from the national carrier.
“We are regulated internationally even by the Africa Airlines Association. There is no way we can contract an oil vendor who has not been cleared by ERC. Ours was simply and purely a commercial decision. ASM gave us cheap rates and we took them,” said Mwariri.
Gulf Oil also widened its complaint to include other airlines, naming Fly540 and Safarilink. It alleged that Fly540 had contracted Pacific Oil despite the company lacking an ERC clearance licence. Fly540 said it chose Pacific on commercial grounds and insisted it believed the firm was licensed. Nixon Ooko, Fly540’s Corporate and Industry Affairs Director, could not produce the licence in Parliament.
“We are a small airline. We have to go for the cheapest rates. We cannot afford the likes of Gulf who cannot even advance us credit. That is why we chose Pacific,” said Mr Ooko in an interview.
Fly540 also has contracts with Oil Libya and Total. Safarilink chief executive officer Alex Avesi said Gulf Oil was bitter about losing business and was using Parliament to settle scores.
Committee chairman David Gikaria dismissed the airlines’ defence and said Gulf Oil had every right to petition when it believed some firms were being given an unfair advantage. He added that Gulf Oil had invested heavily in Kenya and had obtained the required regulatory approvals.
“Gulf Oil is a vendor that has greatly invested in this country. It is a major player locally and is highly regarded by the ERC. It is very unfair that you can take business from them and take it to briefcase operatives with no recognition locally,” said Mr Gikaria.
The Kenya Airports Authority said its role was limited to licensing vendors and that it did not interfere in airline contracts or commercial deals with oil marketers. KAA General Manager for Business Development Jimmy Kibati said the authority checks for an ERC certificate, regulatory insurance cover and an airline contract before licensing a vendor.
“Our mandate is to simply license these vendors (to operate within airports). And when licensing, we check first if they have a certificate from ERC, a regulatory insurance cover and a contract with an airline,” said Mr Kibati.
He added that KAA had allocated space to seven vendors at Jomo Kenyatta International Airport, and said ASM and Pacific were not among them. He also noted that Gulf Oil was already established at JKIA and Wilson Airport, while Pacific Oil and ASM could be operating through hospitality contracts.
The dispute exposed deeper tensions in the aviation fuel market, including claims of unfair competition, questions over licensing and the use of hosted arrangements by smaller marketers seeking access to airport business.
