The Uganda National Oil Company (UNOC) has initiated the sale of petroleum products to oil marketing firms in Tanzania and Uganda as part of market testing activities preceding the implementation of a direct import agreement with Vitol Bahrain.
According to officials from various oil companies, UNOC has begun offering its products to subsidiaries in both countries, albeit in small quantities. This move marks a significant shift as Uganda aims to reduce its reliance on Kenyan oil marketing companies (OMCs) for fuel supply.
The rift between Uganda and Kenya ensued when Nairobi secured a government-backed deal to import fuel on credit from three Gulf oil majors, which Kampala argues has led to inflated pump prices due to intermediary involvement.
An official from an OMC confirmed, “UNOC is currently offering products for sale to OMCs in Tanzania and Uganda. This is fuel supplied by Vitol Group. They (UNOC) have offered the product to our subsidiary companies in Tanzania and Uganda.”
While UNOC has traditionally supplied fuel to state-owned entities in Uganda, it is now poised to expand its customer base to include private OMCs.
Uganda annually imports around 2.5 billion liters of petroleum valued at $2 billion (Sh265 billion), with the Kenya Pipeline Company (KPC) handling the majority of shipments, around 90 percent.
The direct import agreement between UNOC and Vitol Bahrain not only impacts local OMCs but also significantly affects KPC’s transit fuel revenues. Transit fuel accounts for at least 40 percent of the dollars required by Kenya to finance fuel imports under the government-to-government deal, as it is paid for using dollars.
UNOC had initially aimed to commence imports under the Vitol Bahrain deal between January 10-12 of this year but faced delays in obtaining a license from Kenya. This license, issued by the Energy and Petroleum Regulatory Authority (EPRA), is crucial for UNOC to access KPC’s storage and transportation network from the port of Mombasa to Kisumu.
