Share this article

The Uganda National Oil Company (UNOC) has been granted sole permission to import and distribute petroleum products for the Ugandan market, as Parliament approved the Petroleum Distributor (Amendment) Bill 2023.

Parliament has passed the Petroleum Supply (Amendment), Bill 2023, giving the Uganda National Oil Company (UNOC) exclusivity to import and supply all petroleum products destined for the Ugandan Market.

The goal of the Petroleum Supply (Amendment), Bill 2023 is to get rid of the intermediaries in the oil supply chain who are thought to be the reason behind pricing variations at the pump. 

The Petroleum Supply (Amendment), Bill 2023 is aimed at eliminating the middlemen in the oil supply chain that are said to be the cause of fluctuations in oil pump prices.  

UNOC is a government-owned company established to handle the government’s commercial interests in the petroleum sector.

“Uganda imports 90 per cent of its petroleum products through Kenya and 10 per cent through Tanzania. The system currently imposes three layers of middlemen from overseas refineries to Ugandan oil marketing companies. Each of the middlemen companies infuses a profit margin which is ultimately fed into the final pump price,” said Hon. Emmanuel Otaala, the chairperson of the Committee on Environment and Natural Resources, which scrutinized the Bill.

Hon. Otaala was presenting the committee report on the bill during the plenary sitting on Tuesday, 14 November 2023.

The committee observed that Uganda’s current inability to purchase oil directly from the refineries leads to an extra markup on Uganda’s fuel from Kenyan companies and insecurity in the supply of petroleum products which contributes to high and unpredictable pump prices.

If assented to, the Bill will build UNOC’s capital base as it will be able to negotiate fair prices for Uganda, an opportunity not enjoyed now.

MPs said the Bill is timely in eliminating dependence on Kenyan brokers who according to the committee findings, have adversely disadvantaged Ugandans in access to petroleum products timely and in the required quantities.

“Giving UNOC a monopoly is like strengthening our child, it is for our good that we get rid of middlemen who take the big portion of the profit,” said Stephen Baka (NRM, Bukooli County North).

Hon. Alioni Yorke (NRM, Aringa South County) observed that UNOC is fully owned by the government and vouched for the removal of Kenyan competitors who, he said, made Ugandans victims of unstable oil prices.

“We are tired of having our prices controlled by brokers from the neighbouring countries. Many of us, yes even MPs have been the victims of oil prices. This Bill is meant to protect our interests in the sector,” he said.

A section of MPs was however opposed to the Bill saying creating monopolies has not benefited the economy. 

“Past experiences of monopolies including UMEME, the Enrico agreement, the Iron ore agreement, and Dura cement agreement have cost the country money and set a bad precedence for monopolies in Uganda,” said Hon. Paul Akamba (NRM, Busiki) who presented a minority report.

He argued that creating a monopoly is unconstitutional as it prohibits fair competition.

The opposing legislators criticized the move by UNOC in signing an agreement with an international oil company known as Vitol, that will act on its behalf to purchase oil from international refineries.

This according to the committee findings is because UNOC currently lacks the financial capacity to directly purchase petroleum products from oil refineries and shall thus be buying from Vitol. 

As a result, Vitol shall finance the supply of the petroleum products up to delivery points in Kenya on a non-immediate cash payment basis, to enable UNOC to pay after supplying the oil marketing companies within Uganda.

Hon. Nathan Nandala-Mafabi (FDC, Budadiri County West) was afraid that this is likely to enrich Vitol at the expense of Uganda.

“It would have been better that we give UNOC money to trade directly. When we bring in Vitol the shareholder of Vivo Energy that trades as Shell, I can tell you we might be helping them to make more money instead of benefiting Ugandans,” Nandala-Mafabi said.

He added, “Vitol will now source for money all over the world to supply us oil but there will be interest, so the moment we approve a monopoly fuel price will be high”.

The Bill now awaits the Presidential assent.