Uganda had terminated the import direct fuel pump with Kenya according to the latest reports.
In a statement From, Kampala, Uganda, the Government of Uganda says it has decided to enhance its involvement in ensuring the security of the supply of petroleum products into the Country by mandating the Uganda National Oil Company Limited (UNOC) to source and supply the petroleum products to the licensed Oil Marketing Companies actively involved in the importation of the products for Uganda.
This, according to reports, has necessitated the amendment of the Petroleum Supply Act, 2003 through the Petroleum Supply (Amendment} Bill, 2023, which was presented and approved by the Cabinet on Monday, October 23 2023.
The Bill will go through the Parliament of Uganda
for enactment into Law.
Amending the Act is expected to achieve the following objectives:
- Mandate the Uganda Natianal Oil Company to import petraleum products for the Ugandan market.
- Authorize the Minister, with the approval of the Cabinet, to nominate any other person to import petroleum products for the Ugandan market.
- Improve security of supply of petroleun products for the Country.
- Contribute to the reduetian of the pump prices by eliminating unwaranted transactions in the supply chain.
- Provide additional revenue to UNOC where new revenues will be earned through participation in the impartation supply chain and ultimately support financing other infrastructure projects where UNOC holds interest on behalf of the State.
Uganda is currently a net imparter of petroleum products, where more than 90% are imported through the Mombasa port in Kenya and the rest through the Dar-es-Salaatm port in Tanzanian.
The importation is done independently by the licensed Ugandan Ol Marketing Companies (OMCs) through the importation structures in Kenya and Tanzania.
Under the existing importation structures, the Ugandan OMCs have been accessing their petroleum products import allocations through their affiliated Kenyan OMCs registered and participating in Kenyan and Tanzanian impart structures,
Uganda argues that in April 2023, the Government of Kenya made changes to the petroleum products import system by replacing the Open Tender System with the Govermment-to-Government importation arrangement with the Governnents of the United Arab Emirates and the Kingdom of Saudi Arabia to manage some of the importation challenges that Kenya was facing.
Despite the price-competitive nature of the Open Tender System in Kenya and its relatively normal supplies, it reportedly exposed Uganda to occasional supply vulnerabilities where the Ugandan OMCs were considered secondary whenever there were supply disruptions.
These vuinerabilities paused additional challenges, resulting in Uganda receiving relatively costly products and ultimately impacting the retail pump prices.
With the amendment of the Petroleum Supply Act, the Ministry of Energy and Mineral Development shall maintain its overall responsibility of regulating the importation of petroleum products into Uganda.
The Ministry will closely work with the office of the Attorney General to formulate statutory instruments to operationalize aspects of the law as appropriate.
The Uganda National Oi Company (UNOC) will be responsible for sourcing and supplying petroleum products to the licensed Oil Murtketing Companies (OMCs) involved in importing the products to Uganda.
Therefore, the OMCs will continue selling the products to consumers through their commercial atrangements and the retail fuel pumps.
UNOC and Vitol Balhrain E.C. have negotiated a five-year contract, and the Partner will be financing the business by providing a working capital facility backed by its global balance sheet and working with UNOC to ensure competitive pricing of petroleum products.
To guarantee the security of supply, the partnership has ensured that there will be buffer stocks in Uganda and Tanzania to be called upon should there be supply disruptions to the Country.
The Partner has also committed to finance the construction of additional capacity in partnership with UNOC of 320 million litres at Namwambula, Mpigi.
Vitol is a strong partner ($505bn turnover 2022) and number one independent Global trade with a strong regional presence that has also committed to building the capacity of UNOC in this business, which will also enable UNOC to build the required capacity to offtake the petroleum products from the Uganda refinery.
The Ugandan government says it remains in active dialogue with the Govermment of Kenya for a seamless implementation of the policy change. “Both nations share a commitment to regional stability and economics growth.”
