Why Uganda Takes Legal Action Against Kenya Over Fuel Import License Dispute

Uganda has initiated legal proceedings against Kenya in the East African Court of Justice (EACJ) after Nairobi denied a local license to Uganda’s government-owned oil marketer, the Uganda National Oil Corporation (UNOC). In this report, our reporter examines why the denied license pertains to granting UNOC permission to operate in Kenya and manage fuel imports destined for Kampala.

The issue emerged in November 2023 when Kenya declined to issue the required license, prompting Uganda to turn to the regional court in an effort to compel Kenya to provide the necessary authorization.

Court documents filed by the Ugandan Attorney-General reveal that Uganda argues Kenya reneged on a commitment made in April 2023 to support Uganda’s initiative to directly import fuel starting in January 2024.

Kenya, through the Ministry of Energy and the Energy and Petroleum Regulatory Authority (EPRA), reportedly imposed various conditions on UNOC to secure the license, including proof of substantial annual sales and ownership of infrastructure.

UNOC protests, deeming these requirements unnecessary hindrances as the products are transit goods not intended for Kenya.

Commencing January, Uganda plans to source fuel directly from Vitol Bahrain, following challenges arising from Kenya’s government-backed deal with Gulf oil majors. Amid delays in securing a local license, Uganda has explored alternatives, including discussions with Tanzania to use the Port of Dar es Salaam for fuel imports.

“In order to implement the policy of directly purchasing fuel globally, it is necessary for the Republic of Uganda, through UNOC, to transport petroleum products through the Republic of Kenya under the infrastructure of KPC,” emphasizes Uganda’s Attorney-General in court documents.

Uganda, annually importing around 2.5 billion litres of petroleum valued at $2 billion, heavily relies on Kenya for handling at least 90 percent of these imports.

A potential shift to the Tanzanian port of Dar es Salaam could significantly impact Kenyan ports’ revenues, given Uganda’s status as the single biggest market for transit fuel imported through Kenya.