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The recent decision by the Ugandan government to reduce its reliance on Kenya for the importation of its petroleum products is expected to cause significant ripple effects in Kenya.
Currently, Uganda imports 90% of its petroleum products through the port of Mombasa and the rest through the Port of Dar-es-Salaam in Tanzania.
However, the country is looking to fortify its control over the supply of petroleum products.
The move, detailed in the Petroleum Supply (Amendment) Bill, 2023, approved by the Cabinet on Monday, October 23, is poised to impact the dynamics of petroleum trade in the region.
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Uganda's strategic maneuver involves mandating the Uganda National Oil Company Limited (UNOC) to take a central role in sourcing and supplying petroleum products to licensed Oil Marketing Companies (OMCs).
This departure from the status quo is anticipated to have far-reaching consequences for Kenya, which has been a crucial player in Uganda's petroleum importation.
The existing importation structures have seen licensed Ugandan OMCs accessing their import allocations through affiliated Kenyan OMCs.
The policy shift in Uganda was triggered by Kenya’s decision to replace the Open Tender System with a government-to-government importation arrangement with the United Arab Emirates and the Kingdom of Saudi Arabia.
“It exposed Uganda to occasional supply vulnerabilities where the Ugandan OMCs were considered secondary whenever there were supply disruptions. These vulnerabilities paused additional challenges, resulting in Uganda receiving relatively costly products and ultimately impacting the retail pump prices,” said Uganda’s Minister Of Energy And Mineral Development Ruth Nankabirwa Ssentamu.
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In the new plan, the Ministry of Energy and Mineral Development in Uganda will retain its regulatory role in overseeing petroleum product importation, while UNOC will take charge of sourcing and supplying products to licensed OMCs.
The new deal also guarantees buffer stocks in Uganda and Tanzania, minimizing the impact of potential supply disruptions.
Eyes are now on Uganda’s Parliament as the proposal goes through the necessary approvals.