Uganda’s Cabinet has given its approval to a bill aimed at reducing the country’s reliance on Kenya for its fuel imports. Under this proposed legislation, the Uganda National Oil Company (UNOC) will be tasked with the responsibility of sourcing and importing petroleum products for local oil marketing companies (OMCs).
This decision comes in response to recent challenges faced by Uganda, including escalating fuel prices and supply disruptions resulting from Kenya’s government-to-government oil deal with companies from Saudi Arabia and the United Arab Emirates (UAE). Uganda has found itself exposed to occasional supply vulnerabilities in this arrangement, with Ugandan OMCs considered secondary players when disruptions occur.
Uganda currently imports 90% of its petroleum products through the Mombasa Port, with the remainder arriving via Dar es Salaam. The fuel supplied in Uganda is primarily sourced from Kenyan OMCs and subsequently distributed to their local affiliates. The proposed bill seeks to change this by empowering UNOC to directly source and supply petroleum products to local OMCs.
This legislative shift will pose a challenge for Kenyan OMCs with a presence in Uganda, as they will need to negotiate separate import deals with UNOC. According to Energy Minister Ruth Nankabirwa Ssentamu, “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. Therefore, the OMCs will continue selling the products to consumers through their commercial arrangements and the retail fuel pumps.”
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To further bolster Uganda’s quest for a stable fuel supply, UNOC has entered into a partnership with Vitol Bahrain E.C. Under this agreement, Vitol Bahrain E.C. will assist in sourcing and importing oil for Uganda. The Bahraini company will maintain reserves in both Uganda and Tanzania, further reducing the reliance on Kenya for fuel imports.
“To guarantee the security of supply, the partnership has ensured that there will be buffer stocks in Uganda and Tanzania to be called upon in case of supply disruptions to the country. The Partner has also committed to finance the construction of additional capacity in partnership with UNOC, with a capacity of 320 million liters at Namwambula, Mpigim,’’ Dr. Ssentamu emphasized.
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This move is set against the backdrop of the government-to-government oil deal between Kenya and the governments of the United Arab Emirates and Saudi Arabia. Under this arrangement, three state-owned oil companies from the UAE and Saudi Arabia have nominated licensed oil firms in Kenya to import fuel for both local and transit markets. The primary goal of this government-to-government partnership is to provide assurances to the oil firms in the source countries regarding the security of payments.
