Uganda Receives First Direct Oil Consignment from Refinery
Uganda has received its first direct oil consignment from a refinery, with a vessel carrying 58,000 metric tons of petrol arriving at Mombasa, Kenya. This milestone follows a 2024 agreement between Uganda and Kenya on the importation and transit of petroleum products.
Uganda has received its first oil consignment imported directly from the refinery by the Uganda National Oil Company (UNOC).
“As the sun’s rays started piercing the sky this morning, this vessel carrying 80,000 metric tons of petrol arrived at Mombasa,” UNOC announced.
“It is the maiden vessel as UNOC implements the sole importation of fuel products mandate. The fuel will get into the Kenyan pipeline infrastructure and later to Uganda via trucks,” it added.
This comes less than two years after Uganda and Kenya signed an agreement on the importation and transit of petroleum products between the two countries.
The deal was signed on May 16, 2024, during President Yoweri Museveni’s state visit to Kenya.
The two neighbors agreed on the importation and transit of refined petroleum products through Kenya to Uganda by UNOC, which seeks to facilitate the importation and transit of refined petroleum products through Kenya to Uganda.
The arrangement enables Uganda to import refined petroleum commodities directly from the producer countries.
Uganda had been blocked from getting a license to import oil through Kenya on the grounds that UNOC did not meet the minimum requirements set by the Kenyan government.
Last year, Uganda amended the Petroleum Supply Act 2008, giving the state-owned UNOC the exclusive authority to import and distribute all petroleum products nationwide. The government claimed this move would improve the security and efficiency of petroleum supplies and eliminate middlemen.
Following this, Uganda entered into a multi-billion-dollar agreement with the foreign firm Vitol Bahrain to source and supply its fuel needs. This agreement gave Vitol exclusive rights to procure and import fuel from overseas refineries for UNOC, with delivery points in Kenya and Tanzania.
UNOC would then import these petroleum products into Uganda and distribute them to private marketing companies like Vivo (Shell), Total Energies, and Stabex, among others.
This change meant Uganda would stop purchasing fuel from Kenyan firms starting January 1, 2024. However, as a landlocked country, Uganda relies on the Kenyan pipeline for fuel imports. Therefore, UNOC applied for a license in Kenya to operate as an oil marketing company and import fuel through the Kenyan pipeline.
The Kenyan Ministry of Energy and the Energy and Petroleum Regulatory Authority (EPRA) set several requirements for UNOC to obtain a license. These included proof of annual sales of 6.6 million liters of super petrol, diesel, and kerosene, establishing a branch in Kenya, owning a licensed petroleum depot, operating at least five retail stations locally, and having a minimum annual turnover of $10 million over the last three years.
UNOC could not meet several of these requirements, such as the necessary annual sales volumes, operating five licensed retail stations, owning a licensed depot, or achieving the required annual turnover. However, it did register a branch in Kenya.
As a result, EPRA rejected UNOC’s license application, citing the company’s failure to meet most of the specified requirements.
Following Kenya’s refusal to grant an operating license to UNOC, Uganda initiated discussions with Tanzania for an alternative route.
However, the Tanzanian route is more expensive than the Kenyan route. The Tanzanian route would be costly for Uganda since the country imports the majority of its petroleum products through Kenya.
The Kenya-Uganda disagreement was resolved following President Museveni’s state visit to Kenya in May.
In 2023, Uganda’s petroleum consumption reached 2.5 billion liters, with 90% imported through Kenya and only 10% through Tanzania.
President Museveni defended the government’s decision last year to halt the purchase of petroleum products from Kenya, arguing that middlemen were inflating prices by up to 59%, causing unnecessary hardship for consumers.
He stated that Uganda imports an average of 2.5 billion liters of petroleum annually, worth $2 billion (Ksh 302.34 billion), with a significant portion of the cost attributed to these inflated fees.
