Kenya Denies Licensing Waiver to Uganda’s State-Owned Oil Firm

Summary:

• Kenya’s denial of a licensing waiver for Uganda’s state-owned oil firm, Unoc, and subsequent legal actions at the East African Court of Justice escalate diplomatic tensions, revealing strained ties and prompting Uganda to explore fuel import alternatives with Tanzania.

On October 31, 2023, Cabinet Secretary for Energy and Petroleum, Davis Chirchir, announced that the Cabinet would discuss Uganda’s request for a waiver on licensing requirements for its state-owned oil firm in its upcoming meeting. However, the decision-making process was delayed.

In a letter addressed to Daniel Kiptoo, the Director-General of the Energy and Petroleum Regulatory Authority (Epra), Chirchir conveyed that the Cabinet would reach a decision on granting the waiver to the Uganda National Oil Company (Unoc) by the end of the first week of November.

Despite this assurance, sources familiar with the situation claim that influential figures within the State House directed the regulator not to grant the waiver, which would have allowed Unoc access to the facilities of the Kenya Pipeline Company (KPC).

Uganda responded by taking the matter to the East African Court of Justice, seeking an order to compel Kenya to issue the permit and open up KPC’s facilities to Unoc.

Officials at the Energy Ministry have refrained from commenting on the issue, heightening tensions between Kenya and Uganda.

Chirchir’s letter emphasized the need for technical teams to assess the logistical arrangements for a smooth transition of petroleum import operations while awaiting the Cabinet’s decision on Unoc’s licensing request.

This waiver request marked Unoc’s second attempt, occurring two weeks after Kenya initially denied the permit, leading to a diplomatic dispute between the two countries.

Epra remained silent on Unoc’s second application for two weeks, succumbing to State House directives.

A month earlier, Epra had rejected Unoc’s license application, citing the company’s failure to meet various requirements, including proof of annual sales, ownership of licensed retail stations, and a licensed petroleum depot in Kenya.

Following this rejection, the Ugandan Minister for Energy and Mineral Resources wrote to his Kenyan counterpart, requesting him to lobby the Cabinet to waive the licensing requirements.

Epra continued to remain silent even after the Cabinet discussed the matter on November 2, 2023, prompting Uganda to escalate the issue to the East African Court on December 28.

Uganda, in its submission, accused Kenya of placing unnecessary demands, violating the East African Treaty and UN Conventions. The accusations focus on breaches of the East African (EAC) Treaty related to maritime transport and ports.

Uganda contends that it has the right to access Kenya’s maritime facilities and transit routes under the United Nations Convention on the Law of the Sea.

As the legal proceedings unfold, diplomatic experts question the strength of ties between Kampala and Nairobi, suggesting that negotiations could have prevented the fallout.

Uganda has also explored alternative arrangements with Tanzania to use the port of Dar es Salaam for importing and transporting fuel destined for Kampala. Talks between Uganda and Tanzania began in November the previous year amid Kenya’s reluctance to grant Unoc a license.