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Uganda-Kenya yet to discuss $40m fuel bond issue, says Nankabirwa
Kenya says that Uganda imported more diesel cargo than had been agreed, which caused a massive increase in the bond fee to $40m. Photo / NMG
What you need to know:
- Kenyan authorities accuse Vitol, the company contracted by Uganda National Oil Company of importing 82,000 cubic metres, which was higher than the 65,000 cubic metres that had been declared
The fuel imported by Uganda through Unoc, which arrived at Mombasa early last week may not be here for the next couple of days or more as dealers have explained they are still receiving old orders.
Although Energy Minister Ruth Nankabirwa had said the fuel would be in the country in a couple of days, fresh charges have delayed the transfer of the cargo from the port to its destination.
According to officials at Uganda National Oil Company (Unoc), the fuel is expected over the weekend.
An undeclared consignment of 17,000 cubic metres of diesel shipped to Mombasa by Vitol Bahrain on behalf of Uganda National Oil Company (Unoc) triggered the latest standoff between Kampala and Nairobi, official correspondences show, with Kenya reacting by imposing a bond fee on the disputed cargo.
Ms Nankabirwa, who arrived in Kampala on Thursday night, it had been claimed, was in Nairobi to meet Kenyan Energy ministry officials over the issue in last-ditch efforts to avert a major diplomatic falling-out.
However, she told Monitor yesterday that the disputed volume of the cargo and the $40m bond fee was not what had taken her to Nairobi, but to thank President Ruto and discuss the possibility of Uganda and Kenya collaborating to import jet fuel.
“I did not want to escalate the issue further than it had reached. I also realised that it will require involvement at the EAC level. That’s when I took a back seat on that. We have more benefits to talk about or we have gained from Kenya. So, there is no conflict among us and I wouldn’t like to hype it story after story, that’s why I didn’t raise it with [President] Ruto,” Ms Nankabirwa said.
Documents obtained by Business Daily, a sister publication to Monitor, show that Vitol imported 82,000 cubic metres of diesel under a direct fuel import deal with Kampala - higher than the 65,000 cubic metres that had been declared to Kenyan authorities by Unoc and approved by the Energy and Petroleum Ministry in Nairobi.
Kenya Revenue Authority (KRA) initially rejected a request by Vitol Tank Terminal International Kenya (VTTI) to offload the Ugandan cargo into its storage facility in Mombasa, citing a breach of conditions set by the Ministry of Energy and Petroleum.
Sources said State House in Nairobi intervened and VTTI was allowed to move the extra load of diesel into its warehouse as it processed additional bond fees.
VTTI General Manager Mark Musembi had, in a letter, requested KRA Commissioner for Customs and Border Control Lilian Nyawanda, to allow the diesel cargo into its bonded customs transits warehouse and assess the size of the bond fee required on the consignment.
“We kindly request that the incoming cargo, approximately 82,000 cubic metres of gasoil (or any other higher volume permitted by the State Department of Petroleum), be received at the Terminal on arrival to avoid any delays,” he said in the July 2 letter.
“This will help mitigate the additional cost of demurrage and ensure efficient use of the jetty. The volume received by the terminal above the volume currently assessed by KRA to be covered by the existing bond shall remain in the terminal pending completion of the two processes or as may be guided by KRA’s resident officer,” he added.
KRA, however, declined to grant Mr Musembi’s request, saying doing so would be a violation of terms of the fuel import deal agreed between the two countries as well as the East Africa Community customs regulations.
“Your request to allow discharge of the 82,000 cubic metres of automotive gas oil (AGO) into your facility upon arrival of the vessel despite the limitations occasioned by insufficient bond is against the conditions given in the Ministry of Energy and Petroleum [in a letter] dated June 28, 2024, and is therefore rejected,” Mr Kiprono Cole Bullut, the KRA acting commissioner for customs and border control, said in response to VTTI.
“Further, Section 62(1), (4), and (5) of the East Africa Community Customs Management Act 2004 as read together with Regulation 76 of the East Africa Community Customs Management Regulation 2010, which requires the bond in force to cover full the tax liability of any goods stored therein. The appropriate bond security, which would cover the tax liability of 82,000 cubic metres of AGO given the current tax rates, is approximately Sh4.428b.”
Mr Bullut further pointed out that VTTI must comply with bond terms because the taxman cannot overrule a pact between Uganda and the Kenyan Ministry of Energy and Petroleum.
“The conditions set out in the letter … from the Ministry cannot be set aside by the Commissioner Customs and Border Control and you are required to comply in full,” he said.
Authorities in Kampala were provoked by KRA’s stand, with Energy Minister Ruth Nankabirwa, sensationally accusing Kenya of derailing its direct fuel import scheme through extra taxation.
“They (Kenya) have increased the bond fee at Vitol terminal where we are offloading our products and when you increase the bond fee to the tune of $40m that means you are pushing Unoc to also increase and Ugandans are not likely to see reduced pump prices,” she said in a post on her X (formerly Twitter) handle.
The pronouncements upset her Kenyan counterparts who were, however, advised against making retaliatory remarks that would further hurt diplomatic ties between the two neighbours.
However, Ms Nankabirwa indicated yesterday she was in Kenya for other businesses, key among which, included a discussion with President Ruto on the possibility of Uganda and Kenya collaborating on the shipment of jet fuel.
“We are going to harmonise with Kenya because jet fuel is so sensitive. It’s all about security and safety which is very paramount,” she said.
Unoc last week received the maiden fuel cargoes under a five-year deal that Uganda inked with Vitol Bahrain, with government saying it needed to eliminate middlemen (oil transporting companies), which would subsequently lower pump prices.
