Finance minister Amos Kimunya has given oil marketer Kenya Oil Company (Kenol) the greenlight to acquire its trading partner, Kobil Petroleum Limited.

Kenol and Kobil have been operating under a joint management agreement, where Kenol provides the management team. The two companies have, however, had different shareholding structures.

Details of the acquisition's approval are contained in the Kenya Gazette dated Friday 19, October 2007.

"Under the Restrictive Trade Practices, Monopolies and Price Control Act, the minister authorises the proposed acquisition of Kobil by Kenol," said the gazette notice.

The Kenol/Kobil deal is akin to the recently terminated British Petroleum (BP) / Kenya Shell arrangement where Shell managed the joint venture.

Kenyan BP arm, which was until last year jointly run with Shell on a 50/50 shareholder arrangement, wound up its operation in the local market after it sold its interests to partner Shell.

The joint venture including Kenya Shell, BP Kenya Limited and Shell BP (Malindi) were engaged in marketing of fuels, bitumen and LPG and supported by two main terminals and the 130 outlets.

Details about the Kenol deal are, however, still scanty and efforts by the Business Daily to reach Mr Jacob Segman, the managing director at oil marketing firm Kenol/Kobil, were fruitless.

The details includes the new shareholding structure after the acquisition as well as whether the deal would trigger any form of restructuring such as job cuts at Kenol/Kobil.

In a bid to expand in Africa, Kenol recently appointed former Kenya Commercial Bank boss Terry Davidson as a director in a flurry of other management changes which saw the appointment of three other directors.

Kenol said the appointments are strategic as the firm seeks to position itself as a leading player in the African oil market.

The firm says it plans to venture into other markets in Africa through investment in service stations, LPG facilities, exports and bulk trading.

Kenol has been enhancing its competitive position on the continent and is currently a key player in Kenya, Uganda, Tanzania, Zambia, Rwanda and Ethiopia, where it has vast business interests and investments.

Kenol/Kobil is the local market leader with a 23.78 per cent share of the oil market and Shell has 21.04 per cent, while Total and Chevron have 17.94 per cent and 15.26 per cent, according to the Petroleum Institute of East Africa (PIEA).

Mr Kimunya's approval came at a time when crude prices rose to a new record last week on strong demand and fears of supply disruptions on the global market, leaving local petroleum product consumers waiting with bated breath for what will happen at the pump stations.

Crude prices set a new record high of $88 a barrel having risen by eight dollars in two weeks in what traders attributed to tensions in northern Iraq and strong demand in America.

Spot checks by the Business Daily reveal that a litre of unleaded fuel is retailing at an average price of Sh84.99 within the Central Business District (CBD) in Nairobi up from Sh80.99 in August.

For oil marketers, the rise in crude prices would worsen the already tough market that has seen the listed marketers post single-digit growth in earnings compared to double-digit growth five years back.

Oil marketers have attributed the tough market conditions to cutthroat competition, constrained pipeline capacity and the upfront payment of taxes, which has a heavy strain on their working capital

The acquisition deal further strengthens Kenol's presence in the industry and is likely to heighten competition among the oil marketers.

With the market size growing only marginally, experts say that the battle for control of the oil market will be won or lost on the pricing front as the top players, including new entrants, match each other on key fronts such as quality.