Uganda’s cabinet has approved a bill to be introduced in the National Assembly that would reduce the country’s reliance on Kenya for fuel imports.
The Uganda National Oil Company (UNOC) will be tasked in the proposed bill with sourcing and importing petroleum products for the country’s oil marketing companies (OMCs).
Uganda noted in a statement issued by the country’s Energy Minister Ruth Nankabirwa Ssentamu that the country has faced costly pump prices and supply challenges in recent months as a result of Kenya’s government-to-government oil deal with Saudi and United Arab Emirates (UAE) firms.
“Despite the price-competitive nature of the Open Tender System in Kenya and its relatively normal supplies, it exposed Uganda to occasional supply vulnerabilities where the Ugandan OMCs were considered secondary whenever there were supply disruptions,” Dr Ssentamu stated.
“These vulnerabilities paused additional challenges, resulting in Uganda receiving relatively costly products and ultimately impacting the retail pump prices.”
According to the minister, Uganda imports 90% of its petroleum products through Mombasa Port, with the remainder arriving through Dar es Salaam.
Kenyan OMCs supply the fuel sold in Uganda to their affiliates in the neighbouring country. The minister has now requested that UNOC source the products and supply them to local OMCs.
This would be a setback for Kenyan OMCs with Ugandan outlets, as they would be forced to enter into a separate import agreement with UNOC.
“The Uganda National Oil Company (UNOC) will be responsible for sourcing and supplying petroleum products to the licensed Oil Marketing Companies (OMCs) involved in importing the products to Uganda,” the minister noted.
“Therefore, the OMCs will continue selling the products to consumers through their commercial arrangements and the retail fuel pumps.”
UNOC has also signed an agreement with Vitol Bahrain E.C. to assist the East African country in sourcing and importing oil. The Bahraini firm will keep reserves in Uganda and Tanzania, reducing the flow of products through Kenya even further.
“To guarantee the security of supply, the partnership has ensured that there will be buffer stocks in Uganda and Tanzania to be called upon should there be supply disruptions to the country. The Partner has also committed to finance the construction of additional capacity in partnership with UNOC of 320 million litres at Namwambula, Mpigim,” Ssentamu remarked.