Uganda pushing for Tanzania pipeline deal, says minister

Private importers of petroleum products on March 5 welcomed a government proposal to partner with Tanzania in building a pipeline that will transport fuel from Tanga to Mpigi, a district neighbouring Kampala capital city.

If realised, the alternative route would insulate Uganda against uncertainties currently clouding use of Kenya’s Mombasa-Kisumu pipeline following the country’s switch in import policy last year that cut out Kenyan middlemen.

The importers, speaking through their umbrella body, the Sustainable Energies and Petroleum Association (Sepa), said the plan would potentially make petroleum products cheaper in Uganda. They, however, questioned the viability of the multi-billion project in its present form.

“The distance from Tanga to Kampala is 1,700km longer than the 1,200km between Mombasa and Kampala. But when you have a pipeline that runs directly from Tanga to Kampala it is cheaper than that from Mombasa to Kisumu since trucks have to carry the petroleum products for another 400km to Kampala. So it is good and cost saving,” Mr Anthony Ogalo, the Sepa chairperson, said.

The Kenyan route through which 90 percent of Uganda’s fuel imports  come through, has the disadvantage that fuel trucks have to be used part of the way.

Mr Ogalo’s spoke in an interview with Daily Monitor shortly after Energy minister Ruth Nankabirwa reaffirmed government’s commitment to the Tanga-Mpigi pipeline.

“Our priority is the Tanga pipeline that will bring products as a security route and then it can also supply the Tanzanian inland with products from Mpigi storage terminal,” Ms Nankabirwa told this newspaper yesterday. 

The planned Mpigi terminal, expected to have a holding capacity of 320 million litres of fuel and, is said to carry a $30 million price tag. When built, it is supposed to complement the 30 million litre facility in Jinja.

But with the country’s total fuel monthly consumption of 200 million litres, the pipeline, Mr Ogalo said, would be operating below capacity.

“The pipeline will be viable if it is going to serve other countries like South Sudan, Rwanda, Democratic Republic of Congo, Burundi, among others, who also import fuel so there you will know that the volume is large enough to keep the pipeline going,” he said.

Ms Nankabirwa yesterday said technical teams from Uganda and Tanzania are comparing notes ahead of actual construction.

“We have requested for some waivers on taxes and also working together on the logistics infrastructure so that we increase the volumes that are going to be handled through the Tanzanian route,” she said.

A week ago, President Museveni and his Kenyan counterpart, Dr William Ruto, resolved to end the impasse on Uganda’s fuel importation through its eastern neighbour.

Shortly after the meeting held at Mr Museveni’s farm in Kisozi, Gomba District, Dr Ruto posted on the micro-blogging site, X, that the contention between Kenya and Uganda was being ironed out. 

“We have agreed on a way forward of sourcing and scheduling imports for the region in a manner that will ensure we achieve the most competitive pricing and maximum logistical efficiency,” he wrote.

“In my meeting with President @KagutaMuseveni today, we also discussed the need for the two countries to urgently pursue the design and construction of the earlier conceptualised Eldoret-Kampala-Kigali refined petroleum product pipeline.”

Ms Nankabirwa said once disagreements over Uganda’s use of the Mombasa-Kisumu pipeline are sorted out, the Tanga route would be used concurrently.

How it started
The deadlock with Kenya ensued beginning September last year when Kenya’s Energy and Petroleum Regulatory Authority (Epra) declined to give an import licence to the Uganda National Oil Company (Unoc).

This licence would enable Unoc use the Kenyan pipeline to transport petroleum products from Mombasa to Kisumu from where local oil marketing companies (OMCs) would pick them in trucks en route to Uganda.

This arrangement was in line with the new Government to Government (GtG) policy after the older Open Tender System (OTS) was abandoned by Uganda. Under the GtG system, government gave monopoly powers to Unoc to import all petroleum products without going through Kenyan middlemen. 

The switch in policy drew from the Petroleum Supply Amendment Act, 2023 enacted by Parliament last October and signed into law by President Museveni in November, to activate the Unoc plan -- which was meant to start in January.

Unoc in August last year, signed a five-year contract with Vitol, a Swiss-based Dutch global energy and commodities giant. Unoc is supposed to buy from Vitol under the terms of that contract.

But failure to secure a licence from Epra affected Unoc’s planning, prompting the two countries to enter negotiations. Kenya’s Minister of Energy later directed Epra to waive the requirements they had placed on Unoc but before this could be done, local Kenyan entities went to court to block the whole exercise.

Court 
In their petition filed in the High Court of Machakos in Kenya, Royani Energy Limited, Mr John Kinuthia Mwangi and Acacia Ridge Construction insisted that Unoc was not eligible for this licence. Among the requirements necessary for licensing were a Shs36 billion turnover covering three years. Also, Unoc had not sold 6.6 million litres of petroleum products in Kenya and does not have the five retail stations and depots within Kenya to fulfil other conditions set by Epra.

Machakos court issued an order on November 7, 2023 blocking Epra from granting Unoc the licence.

Unoc’s appeal was first heard on December 6, 2023, pushed to December 19, then to January 22, where the same court extended its judgment to February 12 and it is now expected to be delivered today. Uganda also sued Kenya in the East African court over the matter. 

Along the way, Uganda started engaging Tanzania, resulting in the idea of Tanga-Mpigi pipeline plan. 

Uganda imports 10 percent of its fuel requirements through Tanzania. 

Details

Statistics from the Energy ministry show that Uganda imported 2.5 billion litres of fuel worth Shs7.6 trillion in 2023.

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