Oil deal: Govt meets fuel dealers today

Unoc will in the new plan take over the sole importation of refined petroleum and related products from the Swiss-based Dutch global energy and commodities giant, Vitol Group, and in turn, sell them to private oil marketing companies (OMCs) in the country.

The plan, when implemented, will end the current open tender system (OTS) used by Ugandan OMCs to buy petroleum products directly from Kenya.

Currently, gulf oil giants Aramco and Adnoc supply petroleum products to only three Kenyan private companies that in turn sell to Uganda’s oil marketing companies.

Officials said the new plan will stabilise stocks, solve price fluctuations and also open a new revenue stream for Unoc.

Mr Anthony Ogalo, the chairperson of Sepa, said today’s meeting will enable them (OMCs) learn more about the deal, which they have been hearing and reading about in news reports.

“I don’t want to be speculative if the move will affect us the private importers or not but we shall all attend and listen carefully and it is from here where we shall decide if the development affects us or not but for now I can’t comment on that,” he said on Saturday.

Ms Irene Batebe, the permanent secretary of the Ministry of Energy and Mineral Development, also confirmed the meeting on Saturday.

She said this is not the first time Vitol will be conducting business with Uganda.
“Vitol has been a Unoc supplier of bulk petroleum products for more than a year having gone through a competitive process in 2021. Other existing Unoc suppliers include Galana, Texas, Hass and Dalbit,” she added.

The development comes barely a week after the Energy minister, Ms Ruth Nankabirwa, briefed Parliament about Cabinet’s proposal to empower Unoc to solely import fuel products into the country and later transact with OMCs.

On October 23, Cabinet resolved and ratified a five-year supply contract that was signed between Unoc and Vitol.

“Effective January 2024, the oil marketing companies will be directly supplied by Unoc, which will improve security of supply and result in competitive prices,”Ms Nankabirwa said.

She notified Parliament that she plans to table a bill to amend the Petroleum Supply Act, 2006 which will enable UNOC’s smooth takeover.  Cabinet has approved the move.

Rationale
Ms Nankabirwa said an amendment of the Act will enable Unoc to purchase directly from overseas, through Mombasa and Dar es Salaam ports, and thereafter deliver to points Uganda oil marketing companies have always picked their products from.

“Uganda suffers because the procurement system of oil products into the country lies with Kenya. It’s Kenya that has for decades been deciding what petroleum products Uganda buys, where,from who, and at what price,” she said.

Ms Nankabirwa said the plan will close a gap that was created in April when the Kenyan government suspended the open tender system (OTS) that was being used by Ugandan private importers, and replaced it with the Government to Government (G-2-G) import mechanism.

Under G-2-G, the Kenyan government now directly transacts with the Gulf Region-based oil entities and later supplies petroleum to private players (both in and outside), as opposed to OTS where Kenyan-registered dealers would purchase petroleum products from the monthly tender winners and later resell to Ugandan OMCs.

President Museveni upon learning about Kenya’s plan on February 27, kicked off the current plan with a directive to Ms Nankabirwa where he asked her to speed up Unoc’s smooth takeover process. He said the plan will ensure supply stability, and also reduce Unoc’s reliance on the Treasury for funding crucial projects like the Kampala Storage Terminal, East African Crude Oil Pipeline (EACOP), and the oil refinery.  

According to its website, Vitol is apparently the largest independent energy trader in the world with an estimated $500 million in revenue. It ships more than 350 Million metric tonnes of crude oil every year.