Kenya to lose Sh15bn as Uganda Seeks to Take Control of Petroleum Imports

Kenya may lose up to Sh15bn as Uganda poised to reduce its dependence on Kenyan petroleum suppliers. Energy Minister Ruth Nankabirwa introduced the Petroleum Supply (Amendment) Bill 2023 in Uganda’s parliament, aiming to empower the government-owned Uganda National Oil Company (UNOC) to take charge of oil supply.

The traditional open tender system used by Ugandan companies to source petroleum products from Kenya may soon become a thing of the past.

Minister Nankabirwa disclosed that the government held discussions with over 40 fuel companies, represented by the Sustainable Energies and Petroleum Association (SEPA), to address a Cabinet resolution regarding the importation of refined petroleum and related products.

Under the Cabinet’s resolution, UNOC is set to become the exclusive importer of petroleum and related products, sourcing supplies from the Vitol Group and subsequently distributing them to private oil marketing companies.

Minister Nankabirwa stated, “Unoc and Vitol Bahrain E.C have negotiated a five-year contract, with Vitol providing the necessary working capital.”

She explained the rationale behind this shift, emphasizing that relying on Kenyan importers had exposed Uganda to supply vulnerabilities, leading to price fluctuations.

Ugandan officials believe that this proposed system will stabilize fuel stocks, ensure security of supply, and address the ongoing price fluctuations. Over the past three months, fuel prices have risen significantly.

This move by Uganda challenges Kenya’s historical control over its neighbor’s petroleum imports, a situation where Kenya determined key aspects of the supply chain.

Uganda’s initiative comes following Kenya’s shift from an open tender policy to a government-to-government import mechanism earlier this year.

Uganda had previously expressed concerns that this change could jeopardize fuel supplies and lead to higher retail fuel prices.