Uganda all smiles after Kenya clears fuel deal

Kenya has cleared the Uganda National Oil Company (Unoc) to start importing petroleum products, using their infrastructure, a minister revealed yesterday.

Unoc, which holds the government’s commercial interests in the petroleum sector, received a green light a few weeks ago after President Museveni and his Kenyan counterpart, Dr William Ruto, met in the former’s farm in Kisozi, Gomba District, where they resolved to sort the fuel issue once and for all.

Speaking during a handover ceremony of the incoming State Minister for Minerals, Ms Phiona Nyamutooro, at her office in Kampala, the Minister of Energy and Mineral Development, Ms Ruth Nankabirwa, said Kenya finally cleared Unoc to start the fuel importation.

“As we speak now, a consent letter has been signed by the parties and my team [the Chief Executive Officer of UNOC and the director of downstream in the ministry], are in Nairobi to receive the certificate,” she said.
 
“They (officials in Kenya now) shall also begin the scheduling of the vessels so that by May this year, we see UNOC beginning to import the product,’’ Ms Nankabirwa added.

This development brings to an end a six-month dispute between the two countries, which started in September last year, when the Kenya state-owned Energy and Petroleum Regulatory Authority (Epra) denied Unoc a Petroleum Import Licence.

Unoc needed this licence to enable her planned sole fuel takeover after the government announced plans to transition from the Open Tender System (OTS) to the new Government to Government (GtoG) fuel importation model.
It is this licence that will help Unoc to use the Kenyan infrastructures, including pipelines, as governemnt plans to officially take over the fuel importation from Local Oil Marketing Companies (OMCs).

Under the GtoG system, the government empowered Unoc, to import all petroleum products and later sell to the local OMCs, unlike the OTS where Uganda OMCs would buy from their Kenyan counterparts directly.
Unoc, in August last year, signed a five year contract with Vitol a Swiss-based Dutch global energy and commodities giant with whom they will be working together to deliver petroleum products to Uganda.

Under this arrangement, Vitol will be supplying the fuel products to Unoc who will in turn sell to the Ugandan OMCs and pay the former later.
The Petroleum Supply Amendment Act, 2023, was in October last year enacted by Parliament and subsequently signed into law by President Museveni in November, to activate the Unoc plan. The deal was meant to start in January.

Uganda has been battling with three Kenyan citizens and firms including; Royani Energy Limited, John Kinuthia Mwangi and Acacia Ridge Construction who on November 7 successfully secured an order from the Machakos High Court, blocking Epra from issuing Unoc with the required licence
The Attorney General in response filed a case in the East African Court of Justice in December 2023, asking it to order Epra to issue the licence to Unoc, a case that had not been decided.

The principal communication officer at the Energy Ministry, Mr Solomon Muyita, told this publication yesterday that the two states used diplomatic means to solve the issue.
“The Machakos case had been a major hindrance barring Epra from issuing the licence to Unoc. All cases have been withdrawn because it was part of negotiations,” he said.

Unoc, he said, will start solely importing the petroleum products in May “because the oil companies had already ordered for April stock. We make orders at least a month before, so we couldn’t cancel the April orders.” 
By Unoc taking over fuel importation, Ms Nankabirwa believes there will be stability in the presence of fuel as well as gradual reduction of pump prices. 

Mr Muyita noted that Uganda is still going on with the plans to construct a pipeline from Tanga in Tanzania to Kampala despite Kenya’s clearance.
“For years, we have been operating the two routes, with the Tanzanian one being used by Western Uganda since it is nearer. The rest [of the country] use Kenya so I can tell you that the plans will remain as earlier planned,” he said.

“We are going to build this pipeline because we are going to start producing our own oil next year. Construct a refinery here as well as this pipeline will help us in marketing our fuel products,” he said.
Ms Nankabirwa thanked Ms Nyamutooro for supporting her last year when she tabled the Bill aiming at making Unoc the sole fuel importer.
“She stood out as one of the few Ugandans who wanted to understand what the Bill was about at that time and she was among the few MPs who understood the government position,” she said.

Mr Peter Lokeris, who handed over his office to Ms Nyamutooro, advised her to be mindful of the way she handles investors.  
“If you choose to use vulgar language on them, they can choose to quit the country. You should work hard to raise the profile of the country,” he said.

Timely move
     According to Ms Nankabirwa, Kenya’s latest admission is good news for Uganda, because they want UNOC to gain experience “in managing the oil refinery”.
“Secondly, the government expects the logistical costs and fuel pump prices to come down because the country will do [running] the system which was bringing multiple layers of taxes,” she added. Ms Nankabirwa also noted that Tanzanian Prime Minister Kassim Majaliwa commissioned the Crude Oil Pipeline coating plant for the plant that is going to construct the East African Crude Oil Pipeline in Sojo Village, Tanzania, which is located in the middle of the entire pipeline.