KAMPALA – Over 40 oil marketing companies have endorsed the new Ugandan government policy of streamlining the importation of oil products into the country.
As the country’s Minister of Energy Ruth Nankabirwa worked on updating the law that will support this policy shift, the oil dealers and technical teams from the Uganda National Oil Company (UNOC) and the energy ministry met at Sheraton Hotel in Kampala on Monday, October 30.
Sources who attended the closed-door indicated that the meeting had been called to prepare oil companies to start the process of expressing interest to Unoc for off-take contracts.
In the meeting, the Ministry of Energy team further explained and allayed the fears of some of the oil companies who were worried that this new supply arrangement would mean UNOC retailing petroleum products to Uganda at petrol stations and therefore get them out of business
“It should be very clear to anyone that the government through UNOC will not be involved in the retail of fuel at the stations so it won’t compete with anyone,” the officer said.
He continued to say that it won’t create a monopoly as has been construed because the business environment of oil trading in the country will remain the same as UNOC doesn’t plan to establish a single petrol station but rather, to fill the gap that was filled by Kenya’s middleman that would outsource all petroleum products and sell them to Uganda oil companies after putting their markups, a factor that would increase sudden unexplained pump prices in Uganda.
It should be remembered that under the previous oil import arrangements, Ugandan companies were not importing oil products from overseas for themselves but rather, Kenyan registered companies were doing that on their behalf and UNOC simply comes in to replace Kenya’s middleman,” The official elaborated.
The team also explained to the oil marketers that the government is extremely confident that the Vitol Group they selected to partner with UNOC will triumph given the fact that it has a huge financial muscle, a $505 billion turnover in 2022 part of which the oil giant has committed to providing UNOC with working capital to develop business, it handles 7.4 million barrels per day yet Uganda only needs 45000 barrels daily, has established infrastructure to facilitate oil trade like storage facilities at the East African ports and is doing the similar deals successfully with other African countries,” the official explained.
With that assurance, the oil marketing companies agreed to cooperate as long as the proposal that is being explained to them doesn’t change in the future.
The new policy will see UNOC replacing Kenya’s middleman and becoming the supplier of fuel to all oil marketing companies effective January next year.
“This has been a long time coming because we have been at the mercy of oil companies that would decide everything related to petroleum products for us. Even as we speak, I know with evidence that companies involved in the G to G haven’t opened the LC for the ship carrying our fuel that arrived on 8th October 2023 and was supposed to be offloaded immediately but up to now, it’s not yet offloaded meaning that in the next few weeks, we shall have serious shortages of fuel in Uganda which will also hike fuel prices at the pump so tighten your belts .. The dealer who preferred said to remain anonymous.
Another dealer said: “We have been at the mercy of our fellow traders in Kenya they would do whatever they want with our oil even after paying for it. For example, in 2021, Kenya was still paying subsidies to oil companies. These subsidies were not being remitted on time, a factor that deprived Kenya’s companies of enough money to order for fuel. For us in Uganda, on the other hand, we had no subsidies so we would pay cash for our fuel imports. So in 2021, Kenyan companies decided to only order fuel for Uganda companies that had paid as they waited for Kenya to release the subsidies meaning that Kenya hadn’t ordered. When the fuel meant for Uganda arrived at Mombasa, the Kenyan government passed a decree that empowered it to localize that fuel meant for Uganda on grounds that oil can’t pass through their country when they don’t have and Uganda run completely dry for over a month. It’s the time the price of petrol reached sh 8000 per litre, but it was hard to explain to our customers,” he said.
Another dealer wondered why the government took this long to rectify this anomaly.
“Uganda is a sovereign country. How did it hand over all the procurement of its petroleum needs to Kenya? Was it by Act of Parliament of Parliament, a cabinet resolution, or bilateral agreement?” he wondered.
“Oil is a sensitive resource just like medicine is for the country, and so it’s grossly wrong to, for example, to ask another country to handle for you all Medical related matters,” she said.
The Energy Ministry Permanent Secretary, Irene Batebe, last Sunday confirmed that Vitol and UNOC negotiated and signed a binding five-year supply partnership contract on 15 August 2023.
According to Ms Batebe, “the preparation for the procurement of the Unoc supplier partner began around 2020, and by 2021, six oil companies including Vitol had already been procured and were already supplying UNOC with oil petroleum products although on a small scale.
After getting frustrated with Kenya’s OTS system, the government decided that it was time for Uganda to have energy independence by empowering Unoc to scale up the trading of oil. The priority was given to the companies that had already been selected competitively on framework contracts with UNOC. When the strength of those six companies was re-evaluated, Vitol emerged as the best in all aspects, having ticked all the boxes” she said.
This venture by UNOC will create the new revenue stream that is badly needed for the growth of of sector as well as prepare UNOC with the skills, expertise, and experience needed to stand on its own to take a center stage at the global transactions when Uganda’s oil production commences, ” Ms Batebe said.
The top Uganda Energy Ministry technocrat further said that Uganda plans to keep Mombasa as its preferred port and will continue paying all the fees to Kenya for using its already developed infrastructure like port, storage, pipeline, etc although other reliable sources at the Ministry of Energy who preferred not to be named to speak freely indicated that Tanzania is doing all it takes to ensure that Dar es Salaam becomes the preferred port and that negotiations between the two countries are in high gear.