Private firms still free to import fuel — govt

Government has allowed private firms to continue bringing petroleum products into the country, staving off a looming risk of shortages and possible steep increases in pump prices resulting from an ongoing stand-off with Kenyan fuel traders.

Many motorists will likely view this development as a New Year present as it now ensures the country guarantees a steady supply of fuel until the trade wrangle is resolved in a regional court.

The dispute with the Kenyans has delayed official plans for the Uganda National Oil Company (Unoc) to assume monopoly importation of fuel into the country as outlined under a new law enacted last year, thereby setting the stage for a possible crisis.

Officials and Unoc mandarins yesterday confirmed the decision as a stop-gap measure in the face of anticipated disruptions.

The authorisation to private dealers was made under a provision in the recently enacted petroleum law that is designed to ensure the country does not plunge into crisis in case of supply disruptions.

“Uganda [will] continue to use the Kenyan importation system with the Ugandan [Oil Marketing Companies] OMCs confirming their import requirements through their affiliates in Kenya, until the government of Uganda secures clearance for Unoc importation, from the government of Kenya,” Ms Irene Batebe, the energy ministry permanent secretary, said.

“The country will continue receiving petroleum products,” she assured this newspaper.

Uganda switched its petroleum import policy under the new law, phasing out reliance on what it determined to be expensive fuel brought in by private firms – a policy switch which angered middlemen in Kenya resulting in the ongoing dispute.

Unoc was supposed to start exclusive importation this month but the agency ran into headwinds in November last year after Kenya’s Energy and Petroleum Regulatory Authority (Epra) found it impossible to grant a key Petroleum Import Licence.

Under the licence, Unoc would have had access to the Kenyan oil pipeline to bring in oil products at a much lower cost.

After registering a branch in Kenya, Unoc in September applied to Epra, seeking to be registered as one of Kenya’s OMCs so that they can freely import and export petroleum products through the fellow East African country.

Daily Monitor’s Kenyan sister-platform, Daily Nation reported then, that Epra declined Unoc’s request on grounds that the latter failed to provide evidence of operating five licensed retail stations in Kenya, or of operating a licensed depot in Kenya.

Other issues raised were that Unoc has not achieved a minimum annual turnover of $10 million (Sh1.51 billion) for the last three years, which is a requirement for applicants with end-user operations outside Kenya.

The Daily Nation story also said Epra indicated Unoc did not prove the requisite annual sales volumes of 6.6 million litres of either super petrol, automotive gasoil (diesel), and/or jet A1/kerosene in Kenya.

As this issue was being resolved at a bilateral level, three Kenyan concerns including; Royani Energy Limited, John Kinuthia Mwangi and Acacia Ridge Construction filed a suit number E014 of 2023 in the High Court of Machakos, asking it to order Epra not to grant the licence to Unoc.

In their petition, they also argued that Unoc did not have the $10 million turnover covering three years as required by the Kenyan authorities; had not sold 6.6 million litres of petroleum products and does not have the five retail stations and depots within Kenya to fulfil Epra conditions, and that it would be bad for the Kenyan government to waive those requirements.

Subsequently, the Deputy Registrar of the High Court of Machakos, issued a November 7, 2023 court order which blocked Unoc’s access to the required licence, for them to trade freely.

Uganda’s Attorney General, Mr Kiryowa Kiwanuka responded by dragging Epra to the East African Court of Justice (EACJ) seeking orders for the licence to be issued to Unoc as well as for a dismissal of the Machakos petition.

Uganda’s case at the EACJ partly relies on free trade commitments made under the East African Community Treaty to which the two countries are signatories.

Yesterday, Unoc’s head of Legal and Corporate Affairs, Mr Peter Muliisa said the ongoing dispute scuttled earlier plans, prompting them to extend the proposed January monopoly take-over by the agency to a possible date in late February or later in March this year.

“The resolution of the court case which we are expecting before the end of this January will determine the way forward but what I can assure the country is that we shall win the case because any landlocked country internationally has right of access to sea and thus we shall go ahead and import the products. The only thing affecting us is the delays now,” he said.

Assurances

Mr Muliisa reiterated that Unoc’s main aim is to ensure that high pump prices that affecting both private motorists, transporters and general trade in the country are reduced.

As the country awaits the EACJ decision, the principal communication officer of the ministry of energy and mineral development, Mr Solomon Muyita said private firms have been given the go-ahead to continue importing under the current Open Tender System (OTS) whose implementation was ended by the new law.

“For starters, OMCs always make orders of their fuel needs months [in advance]. So, the January and February consignments were ordered in October and in early November before we got the law that empowers Unoc,” he said.

Mr Muyita referred to President Museveni’s November 23, 2023 signature into law of the Petroleum Supply (Amendment) Bill, 2023, that was passed by Parliament in October.

The Act gave exclusive rights to Unoc to import all petroleum products and then re-sell them to over 40 OMCs, or private firms in the country.

But due to the Epra frustration, Mr Muyita said Energy minister, Ms Ruth Nankabirwa was prompted to invoke Section (3)h of the Act which empowers her to determine how petroleum products reach the country, including authorisation to private businesses until the current storm dies down.

Under Section (3)h, Unoc or such other person nominated by the minister, with the approval of Cabinet, can mport all petroleum products, as listed in the Third Schedule, destined for the Ugandan market to guarantee security of supply of petroleum products in the country.

When President Museveni signed the new petroleum law, it set off a chain of events, including angering Kenyan middlemen who have long enjoyed the freedom to import petroleum products destined for Uganda at a high cost. It is suspected that through their lobbying, the middlemen contributed to the dispute that has stymied Unoc’s plans.

The items listed in the Third Schedule are; petrol, diesel, jet A-1 and dual purpose kerosene.

The law says importation and supply of these products destined for the Ugandan market to private oil marketing companies shall be undertaken by the Uganda National Oil Company Limited.

However, it also says “… the minister may, by statutory instrument under exceptional circumstances, nominate such other person, with the approval of Cabinet, to import and supply all or a portion of petroleum products listed in the Third Schedule to this Act”.

The intention of this provision is “to guarantee security of supply of petroleum products in the country.”

When contacted yesterday, Mr Anthony Ogalo, chairperson of the Sustainable Energies and Petroleum Association, an umbrella body of over 40 OMCs in Uganda, confirmed that the ministry gave them a go-ahead until when Unoc sorts itself out.

Inside new plan

In the new plan which has met stiff opposition from Kenyan oil dealers, the Uganda government intended to replace the OTS with its Government to Government (G-to-G) import mechanism.

Under the G-to-G, Unoc’s trading partner, Vitol, a Swiss-based Dutch global energy and commodities giant, will purchase the products from its Gulf region counterparts and later sell them to Unoc at a seaport. Unoc would then transport them partly through the Kenya oil pipeline to Uganda.

This will end the OTS where Kenyan OMCs are currently purchasing petroleum products as middlemen from monthly tender winners and reselling onward to Ugandan OMCs. This arrangement adds another cost layer, factoring in their margins, that ultimately make pump prices in Uganda higher than they should ideally be.

Mr Nankabirwa told Parliament in October last year that Vitol signed a five-year supply contract with Unoc and will deliver beyond the country’s expectations.

“The partner will be financing the business by providing a working capital facility backed by its global balance sheet and working with Unoc to ensure competitive pricing of petroleum products. 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,” she said.

In the same spirit, President Museveni in a letter posted on his X-handle on November 5 assured inland East African countries of the expected availability of competitively priced petroleum products, free of manipulation by middlemen.

“The whole of Uganda, North- Western Tanzania, Rwanda, Burundi, Western Kenya, South Sudan and Eastern DRC, will benefit,” he said

Museveni slams critics

The President told of critics of the new plan, including Ugandan OMCs to back, observing that whereas Uganda started the G-2-G migration journey in March last year, some crooks in his government and other actors working with Kenyan middlemen were frustrating the plan because it would kick them out of business.

“…We have now contracted bulk and refinery suppliers able to give us the lower prices. I have discussed this with H.E. Ruto, the President of Kenya, and our delegation is now in Dar-es-Salaam, discussing with Her Excellency Samia Suluhu… [but], however, the internal parasites who have been cheating their country, have launched a social media and mainstream media campaign against our liberation resistance plan against okuseerwa (being over-charged),” he wrote.

Kenyan OMCs or middlemen, for example, he said, had few months ago sold a tonne of diesel to Ugandan importers at $118 compared to the $83 charged by bulk suppliers or refiners; petrol at $97.5 per tonne compared to $61.5 of the refiners or bulk suppliers and kerosene at $114 per tonne compared to $79 charged by bulk suppliers or refiners.

President Museveni noted that Uganda currently spends about $2billion (Shs7.4 trillion) to import 2.5 billion litres of petroleum annually, a figure that could substantially reduce once Unoc takes over.

Mr Muyita said yesterday that Uganda consumes between 185 million and 200 million litres of fuel per month.

Separately, the energy ministry spokesman said even as the EACJ prepares to rule on the matter, the governments of Uganda and Kenya are holding talks to ensure that this fuel import dispute is resolved peacefully.

“At the end of December last year, we received a delegation from the ministry of energy of Kenya and discussed the matter and the main thing now is to see how to remove the court order that was issued [by the Machakos high court],” he said.

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