National Oil Corporation Fuel Stations Rescue Strategy Through a Private Investor

In a bold move to rescue the financially strained National Oil Corporation of Kenya, popularly known as National Oil, the government is set to transfer ownership of over 100 fuel stations to a private investor. This manoeuvre is a crucial part of the restructuring strategy that will break down National Oil into three distinct subsidiaries under a single holding company.

By retaining control over two subsidiaries housing strategic assets, the government will allow a private investor to manage the downstream market entity responsible for the fuel stations. Profits generated from this venture will be shared with the investor, who will be selected from licensed oil marketers both locally and internationally. Energy Cabinet Secretary Davis Chirchir stressed that National Oil’s crippling Kshs 8.3 bn debt and negative balance sheet necessitated this rescue plan for its survival.

The government’s objective is to enable National Oil to thrive in a competitive market by injecting working capital and enhancing branding visibility. Notably, the investor won’t hold shares in the company. The restructuring also involves the creation of three subsidiaries: NOC Upstream Limited for exploration, NOC Trading Limited for midstream petroleum product management, and NOC Downstream Limited for marketing and distribution. National Oil CEO Leparan Morintat emphasized that each subsidiary would concentrate on its core mandate, thus following the model of other State corporations with distinct operating units. The investor’s role will include addressing financial and operational challenges, streamlining operations, and dealing with audit queries. The Treasury, National Oil’s main shareholder, will oversee discussions with lenders to settle arrears.

Founded in 1984, National Oil initially focused on exploration before expanding into downstream activities. Despite past successes, its financial woes are evident, prompting this daring restructuring strategy. With the private investor’s involvement, National Oil aims to rejuvenate its operations, bolster its financial health, and re-establish its market presence

RELATEDPOSTS

Kenya’s private sector growth continues in January

February 6, 2025

The case for governments enabling, not competing with, private enterprises

January 7, 2025