Kenya has doubled the bond fee for fuel consignments destined for Kampala to $45 million, creating a fresh obstacle for Uganda’s direct fuel import scheme. Uganda’s Energy and Mineral Resources Minister Ruth Nankabirwa revealed that Kenya raised the bond fee requirement at the Vitol Tank Terminal International (VTTI) storage facility in Mombasa from $15 million, complicating Uganda’s efforts to lower pump prices.

The VTTI terminal, connected to the Kenya Pipeline Company network in Mombasa, serves Uganda and other landlocked countries. The bond fee acts as a bank guarantee for oil companies importing duty-free transit fuel, securing taxes payable to the revenue authority if the goods are disposed of locally.

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Sources indicate that the Ministry of Energy in Kenya instructed the Kenya Revenue Authority (KRA) to increase the fee, a move likely to impact Ugandan consumers. Minister Nankabirwa expressed concerns about the higher costs being passed on to consumers, stating, “We expect prices to be more competitive for as long as we are not pushed to incur extra costs at the port.”

The increase in bond fees is expected to cause delays and additional demurrage charges, further burdening Ugandan consumers. Banks will need time to adjust the bond amounts, exacerbating the delays before KRA clears the cargo.

This development highlights ongoing tensions between Kenya and Uganda over fuel importation practices. Uganda’s National Oil Company (Unoc) faces increased bond fees at the VTTI terminal, potentially negating expected reductions in pump prices. Uganda’s move to direct fuel importation came after President Yoweri Museveni blamed high fuel costs on middlemen in the Kenyan import structure.

Kenya and Uganda already share the highest fuel prices in East Africa, with super petrol costing $1.46 per liter and diesel at $1.37 per liter in Kampala compared to $1.33 in Kenya. Uganda hoped direct imports would lower these prices, but the increased bond fee represents a significant setback.

This latest hurdle follows a series of disputes, including Kenya’s delay in issuing Unoc a license, which led Uganda to the East African Court of Justice. Although Unoc received the license in March, the bond fee hike reignites tensions.

Kenya’s government-to-government fuel import deal with Gulf oil majors, including Saudi Aramco and Abu Dhabi National Oil Company, aimed to stabilize the Kenyan shilling. However, Uganda criticized Kenya’s lack of consultation and opted for a similar deal with Vitol Bahrain.

Uganda’s first cargoes under the new deal arrived in Mombasa last week, marking a step towards reducing reliance on Kenyan oil companies. As the situation develops, both countries’ strategies and responses will shape the regional fuel market dynamics.