Uganda National Oil Company (UNOC) has secured a 300-acre piece of land in Wakiso District on which to build the Kampala Storage Terminal (KST).
The land, in Namwambula village, will host a 60-million litre storage facility for petroleum products.
UNOC is now in the process of getting a strategic partner for the project expected to cost $51.7 million (Shs194 billion) thereabouts to set up.
UNOC’s equity will be $10.5 million (Shs39.4 billion).
“This is a greenfield, meaning it is just starting, there is nothing on the ground, and we need a partner. This is the process we are working on right now,” Emmanuel Mugagga, UNOC’s chief finance officer, told Parliament’s Committee on Natural Resources.
“Hopefully by the end of [October], we will be advertising for a strategic partner for Kampala Storage Terminal.”
Stanbic Bank is providing advisory services to UNOC.
According to information on UNOC’s website, the strategic partner will be expected to bring in technical expertise, money and experience in development and management of petroleum storage facilities.
KST will serve as a distribution centre for petroleum products from the refinery in Hoima District.
Additionally, it will serve as a delivery point for the planned Eldoret (Kenya) to Kampala pipeline; it will be a storage and distribution centre for imported petroleum products.
Similarly, petroleum products from Hoima that are meant for the Kampala market, western Kenya and northern Tanzania will pass through KST.
Once complete, the new facility will increase Uganda’s fuel reserve storage capacity from 30 million to 90 million litres.
Going by today’s mean daily consumption, should the Jinja and Kampala Storage Terminals be fully stocked, they will hold petrol and diesel stock that is enough to fuel Uganda for 15 days.
Still, UNOC plans to keep on expanding KST’s capacity according to demand, which is bound to rise as many Ugandans move from the low-income to the middle-income bracket and buy more vehicles. The trains on Uganda’s rail tracks use diesel.
Fuel supply disrupted
Following the post-2007 election violence in Kenya, supply of fuel to Uganda through Kenya was disrupted, resulting in the increase of fuel prices from Shs2,000 to Shs10,000.
Now and then, there are threats by drivers of fuel tankers to go on strike over many issues including tax.
Since 2007, the ministry of Energy has been mulling over setting up more fuel storage facilities to mitigate the problem of disruption of supply.
In May 2017, the UNOC took over the Jinja Storage Terminal, and brought in a new strategic partner, One Petroleum Consortium, to stock and manage the Jinja central government fuel reserve tanks, whose combined capacity is 30 million litres.
At the same interface with the committee, Mr John Bosco Habumugisha, UNOC’s general manager, National Pipeline Company Uganda Limited, said the fuel stock at the Jinja terminal has risen from 350,000 litres in 2017 to 8.7 million litres as of August 2018.
However, the fuel there does not belong to the central government; it belongs to One Petroleum Consortium.
UNOC though charges One Petroleum Shs5.5 per litre.
Fuel reserve stock
Because Uganda does not own the stock, UNOC is engaging the government to find $11 million (Shs41 billion) for the purchase of national fuel reserve stock.
“We have had engagements with ministry of Energy, of Finance and we think we are nearing a staged solution where we can have some amount of money released to us so that we can hold reserves for this country,” Mr Habumugisha said.
Besides what is needed for strategic fuel reserves, UNOC also needs money for stakes in the refinery and the crude oil export pipeline, among other projects.
Section 26 (2) of the Petroleum Supply Act, 2003 says to ensure continuity of petroleum supply in Uganda, every licensee shall maintain stocks of not less than 10 days of the average amount of fuel consumed by the licensee within Uganda during the period of three months preceding the effective date of determination.
The minimum working stock, according to Section 26 (3), shall include all stock held in storage depots in Uganda.
It excludes petroleum products in transit within Uganda or from another country, fuel held in retail service or filling stations and held in consumer storage locations.
Section 26 (6) says any person who fails, without lawful excuse, to comply with subsection (1) commits an offence and is liable, upon conviction, to a fine of exceeding twenty-four currency points.
Additionally, the government is conducting a study to identify bottlenecks to the use of lake transport to inform the mitigation measures to support private investments in water transport.
Just across the border in Kenya, the government through the Kenya Pipeline Company, had a jetty built on the shores of Lake Victoria.
It will serve the proposed Kawuku, Entebbe fuel jetty.
According to the Energy Regulators Association of East Africa, Uganda is supporting a private developer to develop jetties at Kawuku in Entebbe and operate four-tonne barges on Lake Victoria. The barges will pick products from Kisumu, Kenya’s port city, and deliver them to Kawuku in Entebbe.