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Uganda turns to Tanzania for petroleum importation after dispute with Kenya
What you need to know:
- The state-owned Uganda National Oil Company's (Unoc) plan to take over sole importation of petroleum products despite being legalised by Ugandan laws is said to have been frustrated by Kenya since September last year.
Dar es Salaam. Tanzania has greeted Uganda's plan to use the Dar es Salaam Port for its petroleum products with open arms after recent meetings with officials from both countries.
The state-owned Uganda National Oil Company's (Unoc) plan to take over sole importation of petroleum products despite being legalised by Ugandan laws is said to have been frustrated by Kenya since September last year.
Uganda’s minister for Energy and Mineral Development, Ms Ruth Nankabirwa, told local media early this week that Kenya’s continuous frustration with the Unoc deal threatened Uganda’s fuel supply stability.
“You can’t sit there and be at 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.
“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,” added Ms Nankabirwa.
Yesterday, the Tanzania Permanent Secretary in the ministry of Energy, Mr Felchesmi Mramba, confirmed the two sides had engaged in negotiations.
“It is true that Uganda has expressed interest in using the Dar es Salaam Port for the importation of some petroleum products. The negotiation came after the arrival of a delegation from a neighbouring country,” he said over the phone.
“At the ministerial level, we are ready. Currently, we are waiting for Uganda’s readiness to commence the importation,” added the PS.
He said Tanzania uses the Bulk Procurement System (BPS) for the importation of a large volume of petroleum products, noting that Burundi, Zambia and Malawi are among the neighbouring countries that have joined the BPS.
Furthermore, he said, having expressed interest, Uganda would join the BPS following Tanzania's readiness to accommodate the neighbouring country.
The PS said Tanzania was now waiting for Uganda to commence the petroleum procurement process, hinting that the decision would provide more details, including importation volume.
“Uganda stands to benefit on issues of economy of scale through the use of BPS, hence reducing importation costs,” he said.
Uganda-Kenya wrangle
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 two Kenyan citizens, Royani Energy Limited, John Kinuthia Mwangi, and Acacia Ridge Construction, successfully on November 7, and 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 judgement 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 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.
Resolution Efforts
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 all the time. Then he sent me, my brother Chirchir [Davis], the Minister of Energy and some [Kenyan] people to court. What do you do if you are sued?” she questioned.
“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 added.
Ms Nankabirwa noted that the new fuel importation plan should be activated. She said: “Because we want to end this panic and get a long-lasting solution. “Our market-driven approach allows supply and demand to dictate pump prices naturally.”
Nairobi sued at EACJ
The case, filed by Attorney General Kiryowa Kiwanuka in the East African Court of Justice (EACJ), 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 (USh7.6 trillion or Tsh5 trillion).
