Kenya Government Monopoly Of Uganda Oil Imports To End

Uganda will begin importing fuel directly from Vitol Bahrain next month, marking a new era of streamlined energy supply. This partnership is expected to lower fuel costs, providing more affordable petroleum products.

Energy and Mineral Resources Minister, Ruth Nankabirwa, told oil marketers in a circular that Uganda National Oil Company’s (Unoc) maiden cargo of super petrol and diesel would arrive between June 18 and 26.

Uganda has negotiated prices with Vitol Bahrain in the hope of lowering pump prices below the current rates that are largely determined by the deal that Kenya signed with three Gulf oil majors.

The start of Unoc’s direct fuel imports marks an end to decades of relying on Kenya for the critical commodity, either through the Open Tender System (OTS) or the current government-backed deal.

“I am aware that the government of Kenya has shared the agreed vessel import schedules indicating the delivery date ranges for the first Unoc cargo for petrol and diesel between June 18-26 June for AGO (diesel) and June 22-24, 2024 for PMS (super petrol) alongside government-to-government vessels including a portion of products destined for Uganda,” Ms Nankabirwa said.

Ugandan authorities say the deal with Vitol will offer consumers lower prices than the ones based on Kenya’s government-backed deal.

But while Unoc has negotiated premiums with Vitol Bahrain under a five-year agreement, tariffs to be charged by Kenya Pipeline Company (KPC) will also be integral in determining retail prices in the neighbouring country.

Uganda has in the past few months decried costly fuel, accusing Kenya of negotiating high prices in the deal with Saudi Aramco, Emirates National Oil Company and Abu Dhabi National Oil Company.

Under the deal with Vitol Bahrain, the bigger chunk of Unoc’s fuel will come through the port of Mombasa with the rest being shipped through Dar es Salaam.

Uganda imports about 2.5 billion litres of fuel every year, valued at $2 billion (Ksh269.96 billion at current exchange rates), with KPC handling at least 90 percent of the cargo.

Ms Nankabirwa’s circular ends months of waiting where Unoc had been forced to delay the start of the direct imports deal as the Ugandan oil company awaited a licence to operate as a local oil marketer in neighbouring Kenya.

The permit, issued in March and with a validity period of a year, will allow Unoc access to the storage and transport network of KPC, notably line fill and ullage.

Line fill is the minimum volume of fuel needed to occupy the physical space of a pipeline for its efficient flow while ullage refers to the empty air space in a tank or pipeline to allow for the fuel to expand.