Kenyan Set To Lose $100 million in Handling Uganda’s Petroleum

The Ugandan government is actively working on legislative changes to modify the regulations governing the importation of petroleum products. Presently, 90% of Uganda’s fuel imports are acquired from Kenya, with the remaining 10% originating from Tanzania.

The existing practice involves Gulf-based companies supplying petroleum products exclusively to three Kenyan firms, which, in turn, sell these products to Ugandan oil marketing companies. This arrangement has led to a distressing increase in fuel prices in Uganda, prompting widespread protests in the landlocked East African nation.

President Yoweri Museveni of Uganda has pointed fingers at Kenyan intermediaries for inflating fuel prices destined for Kampala. The unrest is partly attributed to transit fuel cargo taxes imposed by the Kenya Revenue Authority and management fees charged by local oil marketers selling petroleum products to Uganda.

Over the past three months, the price of fuel has surged from Ush4,900 ($1.29) to Ush5,400 ($1.42) per liter of petrol, resulting in public outrage. Uganda is also dismayed by being excluded from the negotiations surrounding the government-to-government fuel deal between Kenya and two Gulf nations.

Dr. Joseph Muvawala, the Executive Director of the National Planning Authority (NPA), has recommended that Kampala consider direct importation of crude oil from oil-producing and exporting countries. He believes that such a direct importation process could reduce fuel prices at the pump by 15 to 20%.

Uganda has historically been bound by Kenya’s decisions regarding the type, source, quantity, purchasers, and pricing of petroleum products. To potentially alter this dynamic, Uganda’s Energy Minister Ruth Nankabirwa has introduced the Petroleum Supply (Amendment) Bill 2023 in parliament. This bill aims to grant authority to the government-owned Uganda National Oil Company (Unoc) to take charge of oil supply.

If the bill is approved, Unoc would become the exclusive importer of petroleum and related products, supplied by the Vitol Group. Unoc would then distribute these products to private oil marketing companies. This change could potentially result in Kenya losing up to $100 million annually, which it has earned from handling Uganda’s petroleum and related products.

Moreover, around 40% of the fuel imported by Kenya is re-exported, primarily through Uganda to the Democratic Republic of Congo and South Sudan.

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