No immediate solutions to current energy crisis

Seen purely through the lens of the current energy crisis, the recent visit of Russia’s Foreign minister did not produce something fungible—at least in the short term—as Robert Madoi writes in this explainer. 

Will the visit of Russia’s Foreign Minister impact on the oil shock Uganda is grappling with?

It was inevitable that some degree of attention would be devoted to the tonnes of oil from Russia that were expected to remain unsold after the invasion of Ukraine yielded an oil embargo. The volume of Russian seaborne oil exports has not cratered despite—or in fact because of—tightening Western sanctions on Moscow. Preliminary data from Kpler—a shipping analytics firm—indicates that Russia’s shipped crude exports averaged nearly 3.88 million barrels per day (bpd) last month. This represents a startling growth of more than one million bpd on pre-war levels. Trade flows from June 1-15—as per Kpler—put the biggest destinations for Russia’s seaborne crude exports as China and India. Other key importers were Turkey, Poland, the Netherlands and Italy. During last week’s visit to Uganda, Mr Sergei Lavrov—Russia’s Foreign minister—said thus: “We are selling oil to any country interested in it…if any country so desires, there are no obstacles to that—be it India, China or any African state.”

So why doesn’t Uganda position itself to get cut-price Russian fuel?

Despite facing steep price increases, recent datasets from Kpler and International Energy Agency indicate that Africa does not import Russia’s crude oil and condensate exports. Most of Africa’s imports come from the Middle East, thanks to the Gulf providing a much cheaper shipping route. Since 2011, Uganda has received the vast bulk of its petroleum products via the Kenya route using the open tender system. The capacity sharing ratio for transit was this year whittled down to 55:45 from 60:45. An expert in the oil and gas sector told Saturday Monitor that while “private oil companies buy oil from anywhere” in the open tender system, the black gold “most likely comes from the Gulf and India.” The cut-price Russian fuel—with a discount of about $30(about Shs116,000) per barrel—does not, the expert added, suffice because of the distance between the East African coast and Russia. What’s more, the expert further revealed: “You would have to refine the oil, which increases the cost [at the pump].”

Does this mean Uganda has entirely ruled out buying cheap Russian crude?

Not entirely. Dr Joseph Muvawala, the executive director of the National Planning Authority (NPA), has proffered a plan to address the cost overruns that have recently plagued consumers at the forecourts. Dr Muvawala believes the recent sledgehammer blow can be cushioned substantially if crude oil is imported from the producing countries and “refined in Mombasa.”  The refinery in Kenya has, however, faced strong headwinds, twice changing ownership in the past six years. While the Kenya Pipeline Company-controlled refinery has a crude storage capacity of 230 litres, it has been in stasis since 2013. 

So were the bilateral discussions alive to the fact that energy solutions are of the essence?

From the looks of it, yes. Mr Lavrov talked about an undertaking in which both Russia and Uganda “search for new areas for new ways of cooperation in the energy [sector].” While the Russian Foreign Minister’s comment was nuanced, his country has in recent times held out nuclear technology as a plausible antidote to Africa’s chronic energy poverty. The footprint of Rosatom—a Russian state corporation that specialises in nuclear energy—has grown incrementally in Africa. The company has a working agreement with the government of Uganda. President Museveni recently said plans to embark on building the first-ever Atomic Energy plant in Uganda have been put in gear. There are 19 milestones to be cleared, with pre-feasibility studies on nuclear power programmes already ticked. Focus has since been turned to erecting specialised nuclear institutions.