Uganda struggles to explain origin of extra diesel cargo in Mombasa

This prompted the then Cabinet Secretary for Energy Davis Chirchir to direct the Kenya Revenue Authority to slap a $40 million bond fees bill on Vitol’s storage facility at the port – an increase of $25 million – and not to load the fuel into the Kenya Pipeline over the extra 17,000 cubic metres of diesel that was undeclared.

On July 11, the Business Daily reported that shipping documents reviewed by the paper indicated that Unoc’s maiden fuel cargo exceeded what was declared, raising questions about Kampala’s push for direct fuel imports. 

Tony Otoa, Unoc’s chief corporate affairs officer maintains that the firm’s diesel cargo, amounting to 80,000MT was all declared.

“How does a vessel we talked about with those quantities for over a month be undeclared?” he said.

But the paper trail in Mombasa shows otherwise: Vitol, Unoc’s import partner, made a last-minute plea to KRA customs chief Lilian Nyawanda in a July 2 letter – just hours before the first vessel landed – to allow in higher volumes than what was declared, a request the tax body rejected. 

“We request that the incoming cargo approximately 82,000 cubic metres of gasoil (or any other higher volume permitted by the State Department of Petrol), be received at the terminal on arrival to avoid any delays,” wrote Mark Musembi, general manager of Vitol Tank Terminal International (VTTI).

An industry executive familiar with the matter says Uganda Energy Minister Ruth Nankabirwa flew to Kenya to meet with Mr Chirchir to have him waive the extra bond fees on Vitol Tank Terminal International (VTTI) storage terminal at the port, but this yielded “nothing but embarrassment.”

This was the second time in four days that Ms Nankabirwa was travelling to Kenya; first to receive Unoc’s first shipment last week, and now to voice Uganda’s objection to the levy that will trigger higher pump prices, negating the very reason Uganda pushed to directly import its petroleum products.

“Whichever way it is explained, it was shabbily done,” our source said, arguing that the explanation that there were more orders than the volumes agreed for the maiden shipment should have been made clear from the start.

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On return however, Ms Nankabirwa said the disputed volume of the cargo and the $40 million bond fee was not what took her to Nairobi, but the reason for her trip was to thank President William Ruto and discuss the possibility of Uganda and Kenya collaborating to import jet fuel, according to the Daily Monitor. 

This is a climbdown from her comments released in a video message on X days earlier, in reaction to the tax Kenya had slapped on Uganda’s fuel imports.

“I will be going back to Kenya to meet my colleague [former Cabinet Secretary for Energy Davis Chirchir], because of one thing: They have increased the bond fee at Vitol terminal where we are going to offload our products,” she said on July 8. 

“I am still in negotiations with the Kenyan government to make sure that they don’t force on us this kind of thing. The bond fee at VTTI in Mombasa, that is Vitol terminal in Mombasa where we are storing our products; 40 million dollars is a deterrent. And this is not how the EAC spirit should operate,” she added.

Unoc’s spokesperson Otoa, when pressed why the docket minister beat a hasty retreat from her earlier comments on the hiked bond fees, in the face of the new information of the inconsistencies in the diesel cargo, said “the bond issue is a government of Kenya and VTTI issue”.

He, however, explained the conflicting figures, saying the oil firms’ orders exceeded the import volume Uganda was allocated at the supply planning meeting held in Nairobi on May 22, to be received into the Kenya Pipeline Company (KPC) system in Mombasa with a delivery date range of July 2-4 2024.  

“There were concerns by some industry players that the delivery by Unoc [of 80,000MT] would affect the planned delivery of a portion of the transit diesel to Uganda through G-2-G arrangement as earlier scheduled for delivery to the Mombasa port within June 2024 with planned loadings for delivery to Uganda from July 2024,” he said.

The planning meeting agreed that the KPC system prioritises the delivery of orders oil marketers made under the G-2-G arrangement that were in transit within July along with Unoc’s first 650,000MT to be availed to the Ugandan dealers and the remainder of 15000MT to be loaded within August 2024.

The state-owned Unoc, now the sole supplier of fuel in Uganda, explains that the joint planning meeting agreed that on July 5, 2024, MT. Sinbad carrying 80,000MT of diesel destined for Uganda is allowed to fully discharge at the port of Mombasa.

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About 28,000MT was discharged to the VTTI terminal and the rest to the KPC terminals in Mombasa, with Ugandan oil marketing companies waiting to receive their 80,000MT demand split into two portions after exhausting the G-2-G delivery.

Yasin Nasser, Country Manager of Moil also says the KPC transportation schedule is still handing import orders made under the G-2-G regime, and with Kenya slapping increased bond fees on Unoc fuel imports, it is not clear at this point what impact it might have on pump prices.

“We don’t know where Unoc the fuel is [because] we are still loading old stock,” he said. “And until these products come in, we won’t know the pump price.”

However, questions remain as to why the Kenyan government moved to impose an extra tax on fuel imports if the more than agreed initial shipment volumes were endorsed by the joint planning meeting of Ugandan and Kenyan officials.

*Written by Julius Barigaba