Uganda engages Tanzania as Kenya frustrates Unoc fuel importation plan

Government has commenced engaging its Tanzanian counterpart, to allow state-owned Uganda National Oil Company (Unoc) channel its petroleum imports through Dar es Salaam.

Unoc’s plan to take over sole importation of petroleum products into the country despite being legalised by the Ugandan laws, has since September last year been frustrated by Kenya.

The Minister of Energy and Mineral Development, Ms Ruth Nankabirwa, told reporters on Tuesday that Kenya’s continuous frustration of the Unoc deal is threatening Uganda’s fuel supply stability.

“You can’t sit there and be on the mercy of one person. So far I have met the President of Tanzania, my president sent me as an envoy and we are in discussion,” she said.

Ms Nankabirwa added: “So we know that the alternative route might be expensive  because of the logistics that are involved but we also know that there is a possibility of a negotiation with the government of Tanzania, to waive some taxes so that their sister country can be able to do business”.

The Kenyan state-owned Energy and Petroleum Regulatory Authority (EPRA) initially refused to grant Unoc a Petroleum Import Licence in September. Subsequently, diplomatic engagements between the two countries prompted the Kenyan Minister of Energy to instruct EPRA to lift the requirements imposed on Unoc. However, before this directive could be implemented, Kenyan citizens mobilised and took legal action, effectively obstructing the entire process.

Uganda filed an application requesting the High Court of Machakos to dismiss where two Kenyan citizens Royani Energy Limited, John Kinuthia Mwangi and Acacia Ridge Construction, successfully on November 7, secured an order from the same court blocking Epra from issuing Unoc with the required licence.

Unoc’s Application was first heard on December 6, 2023, pushed to December 19, then to January 22, where the same court extended its judgment to February 12.

Uganda, through Unoc, is transitioning from the old Open Tender System (OTS) model of fuel importation, where local oil marketing companies were buying petroleum products directly from their Kenyan counterparts, to the new Government-to-Government (G-2-G), which was championed by the President in March last year.

Within the framework of G-2-G collaboration, the government intends to utilise Unoc, empowered by the enactment of the Petroleum Supply Amendment Act, 2023. Unoc will oversee the importation of all fuel products in partnership with Vitol, a Swiss-based Dutch company specialising in “global energy and commodities.” Subsequently, the government plans to distribute these products to Oil Marketing Companies (OMCs).

To activate this plan, Unoc was initially tasked with utilizing the Kenyan Pipeline for the transportation of its products to Kisumu. From there, Ugandan trucks were intended to pick up the products.

However, this aspect of the plan has faced impediments due to resistance and obstruction from the Nairobi authorities.

Unoc was initially tasked with utilising the Kenyan Pipeline for the transportation of its products to Kisumu. From there, Ugandan trucks were intended to pick up the products. However, this aspect of the plan has faced impediments due to resistance and obstruction from the Nairobi authorities.

Ms Nankabirwa said the Kenyan president, Mr William Ruto, has on several occasions shown positivity towards Uganda’s move “but I don’t know where all this frustration is coming from”.

“The president sent me to meet President Ruto four times and he was so supportive on all the times then he sent me, my brother Chirchir [Davis], the Minister of Energy and some [Kenyan] people jumped in court, what do you do if you are sued? You wait for the ruling. So we have been talking and we are continuing to talk but now, we have a time frame because we feel the pump price in Uganda should be lower,” she said.

Ms Nankabirwa noted that the new fuel importation plan should be activated. She said: “because we want to end this panic and get the long lasting solution.

“Our market-driven approach allows supply and demand to dictate pump prices naturally,” she said.

Background

The case, filed by Attorney General Kiryowa Kiwanuka in the East African Court of Justice urging it to instruct EPRA to issue the licence to Unoc, is anticipated to receive a verdict next week.

Uganda primarily sources its petroleum imports, with more than 90 percent coming through Mombasa, complemented by additional imports via the Dar es Salaam port.

According to statistics from the Ministry of Energy, Uganda’s petroleum consumption in 2023 reached 2.5 billion litres, with a total value of $2 billion (Shs7.6 trillion).

[email protected]