Uganda to start importing petroleum products with or without licence from Kenya – The Africa

The Ugandan government intends to replace oil marketing companies with the state-owned Uganda National Oil Company (UNOC) as the sole importer of oil products.

UNOC said it will not be involved in transportation of the products to Uganda. But for UNOC to enter the import business, it needs a licence from the Kenya government, which has not been forthcoming.

For several years, Uganda was the only country in the region whose petroleum industry was dependent on market forces of demand and supply. However, the Museveni-led government amended the law in November in order to take over the import market.

UNOC signed a five-year deal with Vitol Bahrain E.C. — a Switzerland-headquartered Dutch petroleum commodities trading firm — to source and finance its imports.

Vitol will be handing over the petroleum products directly to UNOC at the Mombasa or Dar-es-Salaam ports. UNOC will in turn pay Vitol after selling products to petroleum product retailers in Uganda.

Anthony Ogalo, the general manager at oil marketers’ body Sustainable Energies and Petroleum Association (Sepa), says:

“The government of Uganda is not going to regulate prices. Oil marketing companies who will determine their own prices at the pump based on their costs, cost base and the elements that they add to the pricing.”

No licence? No worries

The Energy and Petroleum Regulatory Authority (EPRA) is the Kenya government agency that is supposed to licence to UNOC, but it turned down the application.

EPRA argued that UNOC didn’t meet requisite requirements such as an annual sale of at least 6.6m litres of petroleum products, lack of petrol stations in Uganda and failure to demonstrate an annual turnover of $10m.

A number of oil marketing companies in Kenya that were selling petroleum products to Ugandan companies have sued EPRA seeking to block attempts to licence UNOC. The case is yet to be decided in Kenya High Court.

But with or without the licence, Peter Muliisa, legal and corporate affairs director of UNOC, tells The Africa Report that they will enter business in February next year.

If the Kenya route fails, all imports will likely go through Dar–es–Salaam, which comes with a high transportation fare

“We have a presence in Kenya. We have an office, we have staff, we have [everything] in place and our target is to have our first shipment in February,” Muliisa tells The Africa Report.

“[The licensing process] hasn’t been completed, but we generally think it’s really one of those things that should not hinder us,” he says.

Muliisa explains that what is key is gaining access to the transportation system, which they don’t need to have a trading licences for.

“We think we should be able to get our products through their pipeline. It’s to their advantage that they transport our products because we pay for transportation,” Muliisa says.

Uganda feels cheated, said Museveni

Early this year, the Kenyan government signed agreements with three Gulf State-owned firms – Saudi Aramco, Abu Dhabi Oil Company (ADNOC), and Emirates National Oil Company (ENOC) – to supply petroleum products to the country on credit.

On arrival at the Mombasa port, the petroleum products are to be handed over to Kenyan oil marketing companies, which in turn sell to retailers in the country as well as Uganda companies.

In November, President Yoweri Museveni criticised Kenyan companies saying there is no need for Uganda to buy petroleum products from middlemen because they lead to inflated prices.

Fellow Ugandans and, especially, the Bazzukulu.

I have a number of issues to share with you. Let me start with the kuseerwa (being over-charged) for the petroleum products from abroad. When we came into Government, we assumed that the Civil Servants would deal with…

— Yoweri K Museveni (@KagutaMuseveni) November 5, 2023

Museveni argued that if the government had bought oil directly from suppliers, oil marketing companies would be paying $83 per tonne of diesel instead of $118; they would pay $61.5 instead of $97.5 per tonne of petrol and $79 instead of $114 per tonne of kerosene.

Uganda imported petroleum products worth $1.5bn in 2012, comprising 20% of the country’s total import bill.

Companies that the government is displacing from the importing business are waiting with bated breath, an executive at one of those companies tells The Africa Report. The government has not officially communicated to them on when it will effectively take over.

“We don’t know what’s going to happen. You need about three months to plan. We haven’t given them our requirements, that needs to be planned,” says one executive who spoke on condition of anonymity.

The Ugandan government however insists that two months are adequate for preparation.

Sharing the bill

More than 90% of Uganda’s petroleum imports have been going through Kenya, but the Museveni-led government wants the import bill shared half-way between Dar–es–Salaam and Mombasa.

“We are even more advanced, and we are looking at the possibility of bringing in some products even before Christmas,” Muliisa says.

Uganda has no impediments in Tanzania. If the Kenya route fails, all imports will likely go through Dar–es–Salaam, which comes with a high transportation fare.

It costs about $40 to transport 1000 litres of petrol from Kisumu to Kampala, but it’s triple the fare if it’s being transported from Dar–es–Salaam port. Such costs eventually reflect in final prices at petrol stations. Dar es Salaam is more than 1000 kilometres from the Ugandan capital.

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