Uganda diversifies oil import routes to meet demand
Uganda Energy Minister Ruth Nankabirwa waves the flag when the first oil shipment destined for her country docked at the port of Mombasa on July 3, 2024. PHOTO | KEVIN ODIT | NMG
What you need to know:
- Kampala says the Dar addition will help it meet its demand for more than 174,000 metric tonnes (MT) of oil under the Petroleum Products Supply Agreement between Vitol Baharain and Unoc.
Uganda is looking to the ports of Mombasa and Dar es Salaam as import routes to ensure the country has an adequate supply of oil. It is a way, officials say, of avoiding the mistakes of the past, when shortages were caused by problems with delivery schedules.
Barely a month after Uganda imported its first oil through the port of Mombasa, Kampala is still struggling to meet its limits. This scenario has forced the Uganda National Oil Corporation (Unoc) to supplement the volume through Tanzania, even if it costs more.
Kampala says the Dar addition will help it meet its demand for more than 174,000 metric tonnes (MT) of oil under the Petroleum Products Supply Agreement between Vitol Baharain and Unoc.
Unoc Chief Corporate Affairs Officer Tony Otoa said the country's move to import part of its oil through Tanzania was to ensure it had adequate monthly stocks of 80,000 MT of petrol, a similar amount of diesel and 14,000 MT of Jet-A1 and kerosene.
"We are struggling with the limits set in Kenya. And Unoc going to Dar es Salaam has nothing to do with cost, we just need to make sure that our demand is met at all times to make sure we have the needed monthly stocks,” he said.
“Uganda consumes about 7 million litres of petroleum products daily, growing at 7 percent per annum.”
On Wednesday this week, Uganda's Minister for Energy and Mineral Development, Dr Ruth Nankabirwa, during a media briefing on the progress of Uganda's oil and gas sector, dashed the hopes of citizens that oil prices would fall any time soon.
Dr Nankabirwa said the tripartite agreement between Uganda, Kenya and UNOC has been signed, paving the way for the commencement of importation.
The first cargo of Unoc petroleum products was received on the vessel MT Martinez with 58,330 MT of petrol and another vessel – Sinbad with 79,968 MT of diesel between July 2 and July 4, 2024, the minister said.
“The pump prices will decline in the medium term. We have to note, however, that petroleum prices are hinged on global market conditions,” said Dr Nankabirwa.
Last week, Unoc said it had started shipping oil products through the port of Dar es Salaam to complement the Kenyan route. In Tanzania, Uganda will mainly use trucks and transport by road.
The company plans to import about 36 million litres of oil per month and expects the volume to increase over time.
However, the importation through Tanzania comes after Uganda imported more than 15 MT in excess in its first shipment through Mombasa in July.
Earlier this year, Uganda began negotiations with Tanzania to use the port of Dar es Salaam for its oil imports, ending its total dependence on Kenya's Mombasa port.
Uganda has chosen Kenya as its first priority for handling its petroleum products, saying Tanzania will only ferry such products during the crisis, marking the end of the monopoly long enjoyed by Kenya's oil marketers.
Uganda has been seeking alternative ways of importing petroleum products, including through a Tanzanian port, after its oil retailers for decades received their cargo through affiliates in Kenya.
Uganda kicked off plans for direct imports through Unoc months after Kenya announced a deal with Gulf majors to import fuel on 180-day credit to ease dollar demand and support the shilling.
Kenya launched the government-backed deal with Saudi Aramco, Abu Dhabi National Oil Corporation and Emirates National Oil Company in April 2023.
At the end of last year, Uganda changed its policy to allow Unoc, a state-owned company, to be the sole importer and supplier of all petroleum products for its market.
Unoc later approached Kenya about the new policy change and, to implement the plan, Unoc stated that it sought to enter into a storage and transportation agreement with KPC. It then needed certain regulatory requirements, including obtaining a licence from Epra to import, export and wholesale petroleum products (excluding LPG).
In May, during President Yoweri Museveni's visit to Nairobi, Kenya conceded to Uganda's demands to import its own refined petroleum products through the port of Mombasa, and plans to extend the pipeline to Kampala were revived.
The project is expected to start in December this year, according to insiders.
The pipeline will extend to Kigali in Rwanda and possibly Bujumbura in Burundi in the future, with each country responsible for developing the infrastructure within its borders.
The three countries have signed a tripartite agreement that will see UNOC import products through Mombasa before being transported by the Kenya Pipeline infrastructure to Eldoret and Kisumu for final delivery by road to Uganda.
The tripartite agreement on the importation and transit of refined petroleum products through Kenya now ends a stalemate between the two countries, which intensified in January after Uganda took Kenya to the East African Court of Justice (EACJ) for refusing to allow its state-owned base in Kenya.
