Kenya turned fuel imports into a monthly reverse auction — lowest bidder imports for all

Kenya's fuel market was a set of opaque, fragmented import deals, and small marketers depended on a few large companies whose import margins were hidden. Supply disruptions were frequent, and the country had little bargaining power.

In November 2003 the Ministry of Energy introduced the Open Tender System under Legal Notice 197: every month, oil marketing companies aggregate the volumes they need, and one tender is held; the lowest bidder wins the contract to import for the entire market.

The design brings economies of scale — one cargo instead of many small ones — and forces every cost into the open, which is why the Petroleum Act 2019 and the Petroleum (Importation) Regulations 2022 made the OTS the compulsory route for importing fuel.

For nearly two decades the system was competitive, market-based and theoretically transparent: marketers aggregate, the Ministry calls a tender, and the lowest bidder wins — a structure the 2022 regulations codified to guarantee supply security and fair prices.

Aggregate demand, then auction the import right

One tender for the whole market captures economies of scale no single firm could.

A published winner and margin make import costs hard to hide.

Local marketers can win the import business, not just the incumbent majors.

Aggregated planning smooths supply instead of lurching from cargo to cargo.

When many small buyers each import the same commodity, pool their demand and auction the single import right: scale and transparency beat a crowd of separate, secret deals.

The OTS ran for about two decades, but by 2021-22 its dollar funding needs (roughly $500 million a month) collided with foreign-exchange shortages, and in 2023 the government moved fuel imports to government-to-government deals with Gulf suppliers on credit — a switch critics say traded the OTS's transparency for financing.