The Government of Uganda has decided to import its petroleum products through the port of Dar es Salaam in Tanzania as opposed to the Kenyan route.
The move is meant to stabilize fuel stocks, create security of supply, and solve price fluctuations in Uganda.
As part of the deal, Uganda’s Ministry of Energy has signed a five-year contract with Vitol Bahrain E.C., a Bahrain-based company, to import the fuel through the port of Dar es Salaam in Tanzania. Vitol is committed to financing the construction of extra storage capacity at Namwambula, Mpigi, thereby adding 320 million liters of storage capacity.
Over the weekend, the Energy Minister Dr. Ruth Nankabirwa Ssentamu briefed Tanzanian President Samia Suluhu on Uganda’s proposed policy for bulk importation and supply of petroleum products to reduce fuel prices.
President Suluhu welcomed Uganda’s efforts to lower fuel costs for its citizens, recognizing the importance of affordable energy in driving economic growth and improving living standards.
Uganda has been importing 90% of its fuel via Kenya and only 10% through the Tanzania route.
But Nairobi early this year agreed a government-to-government fuel deal with two Gulf nations, which made Kampala officials angry as they said they were not consulted. According to Uganda, this could affect price stability in Uganda.
This comes after Kenya in April changed the fuel import system from an open tender policy to a government-to-government import mechanism, where it made a deal with Saudi Arabia and the United Arab Emirates.
The move could see Kenya lose up to $100 million it has been earning from handling Uganda’s petroleum products per year.
The Bahrain-based firm will finance the partnership and extend an additional 320 million litres of storage capacity. This move aims to not only guarantee oil availability in Uganda but also cater to the entire East African region, thus opening up competition for fuel markets in South Sudan, Rwanda, and Congo DR.
Last week, Parliament tabled before Parliament the Petroleum Supply (Amendment) Bill, 2023, that seeks to grant Uganda National Oil Company (UNOC) monopoly to supply imported petroleum products.
Under the existing importation structures, the Ugandan Oil Marketing Companies have been accessing their petroleum products import allocations through their affiliated Kenyan Oil Marketing Companies registered and participating in Kenyan and Tanzanian import structures.
In April 2023, the Government of Kenya made changes to the petroleum products import system by replacing the Open Tender System with the Government-to-Government importation arrangement with the Governments of the United Arab Emirates and the Kingdom of Saudi Arabia to manage some of the importation challenges that Kenya was facing.
According to Nankabirwa, despite the price-competitive nature of the Open Tender System in Kenya and its relatively normal supplies, it exposed Uganda to occasional supply vulnerabilities where the Ugandan Oil Marketing Companies were considered secondary whenever there were supply disruptions.