Govt deserves praise for oil imports stance

Kisumu Oil Jetty at Kenya Pipeline Company

Government officers and Kenya Pipeline Engineers inspect the newly constructed Kisumu Oil Jetty at Kenya Pipeline Company on this picture taken on February 28, 2018. File | Nation Media Group

What you need to know:

The issue: Oil Imports

Our view: The challenge now is to ensure that discussions with Dodoma over using the Port of Tanga produce an outcome that will be in the interests of the long-suffering end user.

The government of Uganda’s decision late last year to cease fuel purchases from Kenyan oil marketing companies (OMCs) has unwittingly received support from an unlikely source. Kampala has made clear its intention to pull the plug on the Kenyan OMCs that account for 90 percent of the 2.5 billion litres of petroleum products it annually imports at a tune of north of $2 billion.

Yesterday Business Daily, our sister publication in Kenya, reported that the country’s ombudsman established that a new purchase deal entered into last March left the end user poorer. Consumers in Kenya and the hinterland, the newspaper reported, “paid billions of shillings in additional costs of petroleum products under the government-to-government (G-to-G) oil deal that inflated the price of fuel compared to the previous supply system on which it was modelled.”

The widely felt impact of the premium currently charged by Kenyan OMCs has a frightening sense of permanence at Ugandan forecourts where prices have stabilised at Shs5,000 or thereabouts. President Museveni should be lauded for starting a conversation around this consequential subject.

A cursory look at figures adduced by the Museveni administration capture just how unsparing the middlemen’s efforts are. Kerosene, a mainstay in Ugandan households, is sold by middlemen at $114 per tonne when the asking price of bulk suppliers or refiners is $79.

For Diesel, the middlemen charge $118 per tonne compared to $83 from bulk suppliers or refiners. Elsewhere, the asking price of petrol from middlemen is $97.5 against $61.5 from bulk suppliers or refiners.

While it remains to be seen whether Vitol Bahrain will wave the proverbial magic wand, the region is starting to see through the desperate alarmism that the middlemen proffered.

Recent bilateral talks between presidents Museveni and Ruto could bring the Kenyan pipeline back into the picture. That notwithstanding, all pointers suggest that a new dispensation is in—excuse the cliché—the pipeline. The state-owned Uganda National Oil Company can essentially, under the new arrangement, settle payments for imports after receiving funds from the OMCs. This in effect means that Kampala ceases being party to the G-to-G agreement between Kenya and Saudi Arabia.

The aforementioned agreement has in the recent past been inundated with grim news, with the red flag from Kenya’s ombudsman the latest blow. Before, the agreement, which runs its course at the year end, popped eyes last December when a switch in the importation lineup saw Oryx Energies supplanted by Asharami & One Petroleum.

President Museveni must be credited for helping Uganda walk away from what is increasingly looking like an unmitigated disaster. The challenge now is to ensure that discussions with Dodoma over using the Port of Tanga produce an outcome that will be in the interests of the long-suffering end user. Or better still coaxing out an even better deal with Nairobi.

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