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UNOC deal with Vitol dangerous, as NRM, FDC politicians cry

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Ugandan businessman and politician, belonging to the National Resistance Movement (NRM), Mike Mukula was reported in The Eastern African newspaper crying that the decision by Ugandan government to have Uganda National Oil Company (UNOC) as the only supplier of petroleum products in the country, in partnership with Dutch energy and commodity trading giant Vitol will leave his $270 million logistics company (Mahathi Infra Uganda) dead.

Mukula, who heads NRM in the Eastern Region said: “It is not yet very clear how we fit…All oil marketing companies, including us (Mahathi Infra Uganda), will now be buying from one supplier UNOC. We should have been given a chance to compete…,” Mukula said.

As Parliament passed the Petroleum Supply (Amendment), Bill 2023, giving UNOC monopoly advantage, Nathan Nandala-Mafabi, the Budadiri County West legislator was afraid that this is likely to enrich Vitol at the expense of Uganda.

“It would have been better that we give UNOC money to trade directly. When we bring in Vitol the shareholder of Vivo energy that trades as Shell, I can tell you we might be helping them to make more money instead of benefiting Ugandans,” Nandala-Mafabi, an economist, said.

Nandala-Mafabi, also the Forum for Democratic Change (FDC) party Secretary General added, “Vitol will now source for money all over the world to supply us oil but there will be interest, so the moment we approve a monopoly fuel prices will be high”. Nandala operates some fuel outlets in Uganda.

From the complaints of the two politicians, it appears government rushed with the deal without much preparations, especially that it did not fully scrutinise how Vitol with costly fuel deals in neighbouring Tanzania and other countries in Africa, does its business.

Another concern is that government has not yet published the deal with Vitol, for Ugandans to be sure of whether they will not be cheated, given that some of the money UNOC will be using for operations will be from taxes. A section of the public think government did not involve oil experts as it selected Vitol, which is not clean, as government would want Ugandans to believe.

For instance, in Tanzania, Vitol imported with a cartel and inflated delivered premiums vs neighbouring markets. This cost retailers millions in lost earnings. This can be shown in the analysis when compared with the Kenya OTS imports.

 In Zambia, diesel they imported recently was off specification on sulphur when trucks were tested.  In Bangladesh, during the gas crisis and high gas prices, they flaked on government supply, pocketing over $1 billion. Bangladesh was forced to find alternative supply to ensure 160 million people had power, but it cost the government billions of dollars.

 US Department of Justice fined Vitol $164 million for bribery in Ecuador and Mexico. This was reported by Reuters and Bloomberg. The U.S. fined Vitol for market price manipulation on fuel imports for California (Bloomberg). Vitol exploited UK households of over $500 million on power prices (UK media).

The government of Uganda must take the above matters seriously as it plans to deal with Vitol. Ugandans are tired of deals that take away the little income that they can spare, especially when it comes to petroleum products.

The government must know that Ugandans have not forgotten the bad deals signed with private companies, such as the UMEME contract, of which the taxpayers are to lose money after government said it would not renew the contract after 2025. In April 2023, the Ministry of Energy and Mineral Development indicated that based on a computation made in December 2022, Government is expected to pay Umeme $215 million at the end of the concession in 2025

The citizens have not forgotten the tricky $200 million Entebbe Airport Agreement between the Government and the Export-Import Bank of China, which government tried to renegotiate as mentioned by Finance Minister Matia Kasaija not so long ago.

In addition, that Vitol will only deliver the petroleum products in Kenya, from where UNOC will pick them makes matters worse, as the latter now will have to negotiate with owners of logistics facilities in Kenya, so that Uganda’s products are stored there, and the Kenyans will dictate storage prices, which will in the end be passed on to Ugandan consumers. However, that UNOC will have to register in Kenya in order to do that business makes matters worse as issues of bureaucracy and sabotage will arise. These are some of the matters that indicate the UNOC, Vitol deal is dangerous to Ugandans, which requires government to listen.

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