Now that UNOC is the Sole Importer of Petroleum Products in Uganda Will Pump Prices Reduce?

By Barrel Reporter

On Thursday, 23 rd November, 2023 the President of Uganda, Yoweri Kaguta Museveni, assented to the Petroleum Supply (Amendment) Bill, 2023 signing it into law. This law effectively made the Uganda National Oil Company (UNOC) the sole importer of petroleum products into the country. UNOC was incorporated in 2015, as a wholly government-owned company, with the mandate to manage the commercial interests of Uganda across the petroleum value chain.

90% of Uganda’s petroleum products come through Kenya’s Mombasa Port. Hitherto, the importation of petroleum products into Uganda was run by private Ugandan and Kenyan Oil Marketing Companies (OMCs). A cloud of uncertainty loomed over the horizon, as the OMCs in Kenya and Uganda speculated upon the ramifications of this new law. Upon realising that the law had brought their participation to an end, the Kenyan OMCs petitioned their government to block UNOC from accessing the Kenyan pipeline system, effectively rendering the new law unenforceable. Meanwhile, the Ugandan OMCs were assured by UNOC, that apart from some operational changes, they would not be drastically affected. Sharp exchanges, between Ugandan and Kenyan officials, ensued. This went as far as Uganda’s Attorney General filing a legal suit against Kenya, at the East African Court of Justice, seeking a judicial resolution on the petroleum products importation dispute. It took the heads of state of the two neighbouring countries to quell the dispute. On Thursday, 16 th May, 2024 at State House, Nairobi, President Yoweri Museveni and his Kenyan counterpart President William Ruto oversaw the signing of the Tripartite Agreement between Uganda, Kenya and UNOC that effectively allowed Uganda to import and transport its petroleum products through the Kenyan pipeline system.

One has to applaud the lightning speed with which UNOC has moved to execute their mandate of sole importation of petroleum products in the country. Indeed, as I write this article, petroleum products from UNOC’s first shipment are already on the Ugandan market.

In October 2023, UNOC signed a contract with Vitol Bahrain, a Swiss-based, Dutch global energy and commodities company for it to supply all its petroleum products requirements. In the contract, Vitol agreed to give UNOC up to 6 credit months and guarantee competitive prices. Vitol also pledged to help UNOC increase the strategic reserves of the country. It is important to note that Vitol Bahrain has been in operation for over 55 years. Its turnover in 2023 was over US$400bn, it has a refining capacity of up to 550,000 barrels a day in 6 refineries and trades over 350 million tonnes of crude oil products all over the world.

Between 3 rd - 4 th July, 2024 two ships, one carrying 58,000 metric tonnes of petrol and the second carrying 80,000 metric tonnes of diesel, docked at the VTTI Terminal (part-owned by Vitol), at Mombasa Port destined to Uganda. This marked UNOC’s commencement of importation of petroleum products as a sole importer in Uganda. Hon. Ruth Nankabirwa, Uganda’s minister for Energy and Minerals Development, was in Mombasa flanked by Ugandan technocrats as they witnessed the momentous occasion.

The next dispute between Uganda and Kenya was when Uganda’s energy officials accused their Kenyan counterparts of increasing the bond fee at VTTI terminal from US$15 million to US$40 million. At the time, Hon. Ruth Nankabirwa warned that this increase in bond fees was likely to push up pump prices in Uganda. Nankabirwa has since met with her Kenyan counterpart Hon. Davis Chirchir to discuss the matter. This dispute was later resolved, in mid-July, when all parties reached a consensus that the consignment should be split into two parts.

What is of most interest to Ugandans is, now that UNOC is the sole importer of petroleum products in Uganda, will pump prices reduce? UNOC officials have been noncommittal to a decrease in pump prices, saying they can only guarantee stable, competitive, pump prices. ‘Competitive’ is relative. What is competitive to me, might not be a competitive price to you. So, will Ugandans see a significant decrease in pump prices?

Speaking to journalists, at a press conference held at the Ministry of Energy and Mineral Development’s boardroom at Amber House on Wednesday, 21 st August, 2024, Nankabirwa, said, “The pump prices will decline in the medium term. We have to note, however, that petroleum prices are hinged on global market conditions…but because we have shortened the route internally, even when the world prices go up, it will not affect us as badly as it would’ve affected us when we were still using the Government-to-Government system. I’m calling upon Oil Marketing Companies (OMCs) to reflect this in their pump prices, they should not make exorbitant profits, because we know what they are doing.”

Furthermore in the Weekend Vision, August 24-25, 2024 front-page story ‘Govt Sets Deadline For Fuel Pump Price Reduction,’ it states, ‘Fuel dealers in Uganda have been given up to the end of this month to ensure that the pump prices reduce with a big margin, government has said. Those who do not heed the call, will compel government to introduce a cap on fuel pump prices across the country. The minister (Nankabirwa) explained that in July, when UNOC started its imports, the OMCs had old stock, therefore, the reduced pump prices weren’t immediate. However, starting this August, when all have UNOC stock, they must significantly reduce pump prices.’ So, hopefully we shall see a significant reduction in pump prices by the beginning of September 2024!

There have also been fears that UNOC’s inexperience in handling importation of petroleum products, let alone being the sole importer, could lead to supply disruptions in the country, causing a crisis on the scale not experienced before. However, Hon. Ruth Nankabirwa has dispelled fears, saying that in the event that UNOC fails to deliver, she still has the mandate to nominate another company to deliver. She assured Ugandans that this would be done in a timely manner, since her ministry has full visibility of UNOC’s importation schedules. UNOC also assured stakeholders that it has built capacity, to ensure smooth transition into its new role, as sole importer of petroleum products in the country.

In the near future, UNOC is going to be an epicentre of Uganda’s energy industry. UNOC is in talks with Alpha MBM Investments, A United Arab Emirates-based investment firm, to construct a 60,000 barrels per day Refinery in Hoima District. The Refinery will produce all Uganda’s petroleum products’ needs, including Liquefied Petroleum Gas (LPG). This will go a long way to increase Uganda’s energy security and contribute significantly to our GDP growth.