Ugandan MPs vote to end oil importation through Kenya

 Uganda’s parliament has passed a bill granting State-owned oil Uganda National Oil Company (UNOC) exclusive authority to import all petroleum products.

If approved by President Yoweri Museveni, the bill will end Uganda’s decades-long reliance on Kenyan companies for oil imports. Currently, the companies in the Gulf supply petroleum products to only three Kenyan companies that in turn sell to Uganda’s oil marketing companies.

The decision could see Kenya lose up to $100 million (Sh15.23 billion) it has been earning from handling Uganda’s petroleum and related products per year.

About 40 per cent of the fuel Kenya imports is exported, mostly through Uganda to the Democratic Republic of Congo and South Sudan. MPs who supported the bill said it would usher in a new era of enhanced supply security, stabilised pump prices, and increased revenue generation for UNOC to support vital infrastructure projects.

Uganda’s Energy Minister Ruth Nankabirwa recently said that the country needed to stop importing oil through Kenyan companies as it “exposed Uganda to occasional supply vulnerabilities where Ugandan oil marketing companies were considered secondary whenever there were supply disruptions”.

Uganda, a landlocked country, imports more than 90 per cent of its fuel through Mombasa port and the remainder through Tanzania’s Dar es Salaam port, according to Nankabirwa.

“Kenya has for decades decided what petroleum products Uganda buys, when, from where, how much, who buys and at what price,” Nankabirwa said.

Ugandan officials said the strategic shift is expected to have far-reaching implications, including the elimination of additional markups on fuel, the reduction of unpredictability in pump prices, and the liberation of Ugandans from the influence of fuel cartels that have historically impacted pricing. With UNOC assuming the pivotal role of the exclusive importer, the country is poised to achieve a higher degree of self-sufficiency and autonomy in meeting its energy requirements.

This move not only bolsters Uganda’s energy independence but also enhances its ability to navigate global market dynamics with greater agility and resilience.

Furthermore, the legislation’s impact extends beyond the realm of importation and supply, as it is poised to stimulate economic growth and development.

By entrusting UNOC with the responsibility of importing petroleum products, the government aims to generate additional revenue to bolster the company’s capacity to support critical infrastructure projects. The MPs said the strategic alignment of UNOC’s importation mandate with the nation’s development agenda underscores the bill’s multifaceted significance.

Moreover, the exclusive partnership between UNOC and Vitol, a renowned global energy giant, signifies a pivotal shift in Uganda’s petroleum landscape.

By exclusively sourcing petroleum products from Vitol, UNOC is poised to harness the expertise and capabilities of a leading industry player, thereby ensuring the procurement of high-quality products and fostering operational excellence.

This partnership, according to Uganda officials, is poised to usher in a new era of efficiency and reliability in Uganda’s petroleum supply chain, thereby fortifying the nation’s energy security.

In addition to bolstering supply security, the legislation is set to yield tangible benefits for consumers, businesses, and the broader economy. The anticipated reduction in pump prices, stemming from the elimination of extra markups and enhanced supply stability, is expected to alleviate financial burdens on consumers and businesses alike.

Dr Joseph Muvawala, the executive director of the National Planning Authority had asked the government of Uganda to consider direct importation of crude from oil-producing and exporting countries. This, he said, would result in prices at the pump dropping by 15 to 20 per cent.