Uganda plans to hand over rights for the supply of all petroleum products to a unit of global energy trader Vitol. This deal aims to end the current system, which sources oil products through neighboring Kenya, said Uganda’s Energy Minister, Ruth Nankabirwa, highlighting the need for a more secure and efficient supply chain.
Currently, fuel companies in Uganda buy their supplies through affiliated firms in Kenya. These firms import the products on behalf of the Ugandan companies through the Mombasa port. However, this system, which accounts for 90% of Uganda’s fuel imports, has its drawbacks, as it exposes Uganda to supply disruptions and high pump prices, as stated by Minister Nankabirwa.
“UNOC and Vitol Bahrain E.C. have negotiated a five-year contract, and the partner (Vitol) will be financing the business by providing working capital,” Nankabirwa said on Tuesday.
The cabinet has approved changes to the petroleum law to allow Vitol to exclusively supply the state-owned Uganda National Oil Company (UNOC). UNOC will then sell the products to petrol station operators.
To ensure a reliable and uninterrupted flow of petroleum products, Vitol and UNOC will establish “buffer stocks” in Uganda and neighboring Tanzania.
The legal changes that will buttress the deal were presented to parliament on Tuesday for its approval, Nankabirwa noted, without giving a date for the parliamentary vote.
Vitol and UNOC had already signed the contract, and the first exclusive supplies to the state firm were expected in January, an energy ministry spokesperson said.
The current reliance on Kenyan importers has exposed Uganda to occasional supply vulnerabilities.
“Using Kenyan importers had exposed Uganda to occasional supply vulnerabilities where the Ugandan retail companies were considered secondary whenever there were supply disruptions, which affected retail prices,” Nankabirwa said.
Notably, in March, Kenya entered into deals with Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company. This deal involved a switch from an open tender system in which local companies bid to import oil every month.
However, the Energy and Petroleum Regulatory Authority of Kenya has not yet commented on Uganda’s proposed changes.