Uganda struggles to meet its fuel demand despite direct importation

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Uganda is banking on the ports of Mombasa, and Dar es Salaam as import routes to meet its supply of oil with officials blaming past shortages on delivery schedules.

Barely a month after Uganda imported its first oil through Mombasa port, Kampala is still struggling to meet its limits. This scenario forced the Uganda National Oil Corporation (Unoc) to supplement the amount through Tanzania, even if it costs more.

Kampala says Dar addition will help it meet its demand of more than 174,000 tonnes (MT) of oil under the Petroleum Products Supply Agreement, between Vitol Baharain and Unoc.

Unoc Chief Corporate Affairs Officer Tony Otoa said the country’s move to import part of oil through Tanzania was to make sure there was adequate monthly stock needed of 80,000 MT of petrol, a similar quantity of diesel and 14,000 MT of Jet-A1 and kerosene.

“We are struggling with the limits set in Kenya. And UNOC going to Dar es Salaam has nothing about cost, we just need to make sure that our demand is met at all times to make sure we have the needed monthly stocks,” he said.“Uganda consumes about seven million litres of petroleum products daily, growing at seven percent per annum,” said Mr Otoa.

On Wednesday this week, Uganda Minister of Energy and Mineral Development, Dr Ruth Nankabirwa, at a media briefing on the progress of Uganda’s oil and gas sector, dashed citizens hopes of cheaper oil prices anytime soon.

Dr Nankabirwa said the tripartite agreement between the Uganda, Kenya and Unoc was signed paving way for start of importation.

The first cargo for Unoc petroleum products was received on the vessel; MT Martinez with 58,330 MT of Petrol, and another vessel – Sinbad was received carrying 79,968 MT of diesel between 2nd July and 4th July 2024, the Minister indicated.“The pump prices will decline in the medium term. We have to note, however, that petroleum prices are hinged on global market conditions,” said Dr Nankabirwa.

Last week, Unoc said it had begun shipping oil products through port of Dar es salaam, to supplement Kenya’s route. In Tanzania, Uganda will mostly use trucks and transport it via road.

The corporation intends to import approximately 36 million litres of oil each month and they project the volume to increase over time.

The importation through Tanzania though comes even after Uganda had imported more than 15 MT, in excess, in its first shipment in July via in Mombasa.

Earlier this year Uganda, begun negotiations with Tanzania to use the Dar es salaam port for its oil imports, intending to end total reliance on Kenya’s Mombasa port.

Uganda picked Kenya as the first priority in handling its petroleum products saying Tanzania will only ferry such products during the crisis marking the end of the monopoly long enjoyed by Kenya oil marketers.

Uganda has been seeking alternative ways of importing petroleum products, including through a Tanzanian port, after its oil retailers for decades received their cargo through affiliated firms in Kenya.

Uganda kicked off plans for the direct imports deal through Unoc months after Kenya announced an agreement with Gulf majors to import fuel on a 180-day credit period to ease dollar demand and prop up the shilling.

Kenya started the government-backed deal with Saudi Aramco, Abu Dhabi National Oil Corporation, and Emirates National Oil Company in April 2023.

Late last year, Uganda made a policy shift empowering Unoc, a state corporation, to be the sole importer and supplier of all petroleum products for its market.

UNOC later engaged Kenya on the new policy shift and, to roll out the plan, Unoc said it sought to enter into a storage and transportation agreement with KPC. It then required certain regulatory requirements, including obtaining an import, export and wholesale of petroleum products (except LPG) licence from Epra.

In May, during President Yoweri Museveni’s visit to Nairobi, Kenya gave in to Uganda’s demands to import its own refined petroleum products through the Port of Mombasa, amid revival of plans to extend the pipeline to Kampala.

The project is expected to kick off in December this year according to insiders.

The pipeline will extend to Kigali in Rwanda and possibly Bujumbura (Burundi) in the future, with each country responsible for the development of the infrastructure within its borders.

The two countries signed a tripartite agreement that will see Unoc import products through Mombasa, before being moved by Kenya Pipeline infrastructure to Eldoret and Kisumu deports for last-mile delivery by road into Uganda.

The tripartite agreement on the importation and transit of refined petroleum products through Kenya now brings to an end a stalemate between the two countries which heightened in January, after Uganda took Kenya to the East African Court of Justice (EACJ) in January, for refusal to allow its state set base in Kenya.