On Tuesday, November 14, the Parliament of Uganda passed the Petroleum Supply (Amendment) Bill, 2023, which proposes that the Uganda National Oil Company (UNOC) retain a monopoly for the import of petroleum products.
The bill says that UNOC will both import and supply automotive gasoline or diesel; automotive gasoline or super petrol; as well as Jet A-1 and dual-purpose kerosene.
As an indirect result, this will end the tender system currently in place in the country, as well as reduce Uganda’s reliance on energy imports from Kenya and Tanzania. For the former, the end of business with Uganda could result in approximately $100m in lost export earnings with respect to petroleum products.
Notwithstanding, as Uganda began to ferry fuel from the Port of Kisumu in Kenya, the move was seen a way for Kenya to become the preferred entry point in East Africa for fuel products, in direct competition with Tanzania. Now, the latest amendment to the petroleum supply bill could cause friction in Kenya-Uganda’s trade relationship for oil products, and cause the port on Lake Victoria to become less busy, and even unused.
Uganda has continued its negotiations with Tanzania for business logistics, as it aims to have in place a self-sufficient energy import system.
Uganda shipped its first fuel cargo from Kisumu in December 2022, a 4.5m L shipment of fuel aboard the MT Kabaka Mutebi II, which increased business between the two countries.
“Uganda imports 90% of its petroleum products through Kenya and 10% through Tanzania. The system currently imposes three layers of middlemen from overseas refinery to the Ugandan oil marketing companies (OMCs),” said Hon. Emmanuel Otaala, the chairperson of the Committee on Environment and Natural Resources, who present his committee’s report on the amendment during the November 14 plenary sitting.
“Each of the middlemen companies infuses a profit margin which is ultimately fed into the final pump price,” Otaala said.
The committee said that Uganda’s inability to purchase oil directly from refineries, increases mark-up on Kenyan imports, and insecurity surrounding petroleum products’ supply while already adding to unpredictable pump prices.
Parliament believes the amendment will remove dependence on Kenyan brokers, and build UNOC’s capital base as it will soon be able to negotiate fair prices for Uganda.
“Giving UNOC a monopoly is like strengthening our own child, it is for our own good that we get rid of middlemen who take the big portion of the profit,” said Hon. Stephen Baka.
Impact on oil marketing companies
Anthony Ogalo, general manager of Sustainable Energies and Petroleum Association (SEPA) appeared before Parliament’s Committee on Environment and Natural Resources and made a request on behalf of OMCs in Uganda, which are under their umbrella body, SEPA.
SEPA wanted the amendment of the bill to take into consideration a provision that would allow OMCs to import and supply special petroleum products if UNOC cannot.
“OMCs had agreed to bring higher grade petrol into the country, which could be at 95 to 98 octane rate for purposes of those who drive cars which require high rating petrol. We are asking that the bill allows OMCs to import such products when UNOC is unable,” says Ogalo.
Ogalo further asked that the amendment should allow OMCs to import other oil products excluded from the list to be supplied by government, such as specialised products.
