Uganda seeks Kenya’s advice on state-to-state oil import agreement

By InstinctBusiness Nov 7, 20230

Uganda is considering a government-to-government oil import strategy, similar to Kenya’s, to manage and reduce fuel costs within the country.

Uganda will initiate direct oil imports from Vitol Bahrain, facilitated by the Uganda National Oil Company (UNOC), mirroring Kenya’s government-to-government arrangement.

The Uganda National Oil Company (UNOC) will be the sole importer of petroleum and related products, supplied by Vitol Group. It will then sell to private oil marketing companies.

The Minister for Energy, Ruth Nankabirwa, presented the Petroleum Supply (Amendment) Bill in Parliament as part of the groundwork for implementing the new policy direction.

Most of the fuel to Uganda is supplied by three marketing firms in Kenya, which in turn sell to Uganda’s oil marketing companies.

Nonetheless, the landlocked nation has raised concerns about the arrangement following Kenya’s adoption of the government-to-government import plan in March. It attributes delays in supply in the market to Oil Marketing Companies (OMCs), leading to an increase in fuel prices at the pump.

This follows Kenya’s government-to-government oil import deal with Saudi Arabia and the United Arab Emirates in March allowing for the importation of fuel on a 180-day credit period.

The Kenyan shilling has significantly dropped against major international currencies in the past 12 months, closing yesterday at 151.35 units against the US dollar.

To help Uganda realize the same, the Energy and Petroleum Regulatory Authority (EPRA) is working with UNOC to utilize the Port of Mombasa.

“The Kenyan Government and the Ugandan authorities are engaged in discussions to facilitate the acquisition of the necessary approvals,” EPRA said.

Under Kenya’s Government-to-Government (G-to-G) arrangement, Uganda is currently benefiting from more favorable freight premiums when compared to the central corridor.

Uganda’s oil imports constitute a significant 23 per cent of the total transit market that operates within the Kenyan corridor, traditionally managed by Private Oil Marketing Companies licensed to function within Kenya’s importation framework.