The Minister of Energy, Ruth Nankbirwa has tabled before parliament a bill to regulate the importation of petroleum products.
The Petroleum Supply (Amendment) Bill, 2023, was tabled in Parliament on Tuesday for its First Reading and, if enacted in its current form, will grant Uganda National Oil Company monopoly to supply imported petroleum products to licensed oil marketing companies. Public hearings are expected in parliament.
The Ministry of Energy has tried to dispel questions about a monopoly being established. It insists that “the law is aimed at giving the Uganda National Oil Company (UNOC) the exclusive authority.”
Some of the players told URN that while they are being “locked out”, the government is bent on granting the fuel importation monopoly to a Bahrain-based Company known as Vitol Bahrain E.C under the guise of strengthening UNOC.
The importation and marketing of petroleum products have generally been liberalized with several private entities involved in the business. As the ministry prepared to table the Bill before the cabinet, some of the private players expressed fear that the change in policy was likely to affect their business.
One of the companies that has openly spoken against the proposal is Mahathi Infra (U) which has been transporting oil by tanker ships on Lake Victoria from Kisumu to Bukasa.
One of the Company’s Directors, Captain Mike Mukula warned that the change of policy to create a UNOC monopoly will hurt investors that have put up infrastructure in the fuel importation business.
The Ministry of Energy however described Vitol Bahrain E.C as a strong partner ($505bn turnover 2022) and an independent global trader with a strong regional presence that has also committed to building the capacity of UNOC.
It further said Vitol will also enable UNOC to build the required capacity to offtake the petroleum products from the Uganda refinery. Uganda National Oil Company recently negotiated a five-year contract with Vitol Bahrain E.C.
The Ministry of Energy’s statement said Vitol Bahrain E.C will be financing the business by providing a working capital facility backed by its global balance sheet and working with UNOC to ensure competitive pricing of petroleum products.
Vitol Bahrain E.C. reportedly committed to financing the construction of additional capacity in partnership with UNOC of 320 million litres at Namwambula, Mpigi.
The ministry insisted that Oil Marketing Companies (OMCs) will continue selling the products to consumers through their commercial arrangements and the retail fuel pumps.
The Petroleum Supply (Amendment) Bill, 2023 was approved by the Cabinet on October 23, 2023.
Nankabirwa in a press statement on Tuesday said the government believes that supporting UNOC will enhance its competitiveness on the international stage and benefit the people of Uganda.
The minister said the Government of Uganda has decided to enhance its involvement in ensuring the security of the supply of petroleum products into the country by mandating the Uganda National Oil Company Limited (UNOC) to source and supply the petroleum products to the licensed Oil Marketing Companies actively involved in the importation of the products for Uganda.
The main aims of the bill include assigning UNOC as the sole importer of petroleum products for the Ugandan market, empowering the Minister to nominate other entities for importing petroleum products, enhancing supply security, reducing pump prices, and generating additional revenue for UNOC to support infrastructure development.
By assigning UNOC the responsibility of importing petroleum products, the bill intends to reduce reliance on external suppliers, streamline the importation process, eliminate unnecessary transactions in the supply chain, and ultimately make petroleum products more affordable for consumers.
The government also hopes that UNOC’s involvement in the importation supply chain will generate additional revenue to finance other infrastructure projects that UNOC has a vested interest in on behalf of the State. The amendment also seeks to authorize the Minister of Energy with the approval of the Cabinet, to nominate any other person to import petroleum products for the Ugandan market.
It is hoped that the proposed changes will improve the security of the supply of petroleum products for the Country.
Uganda has on many occasions faced severe fuel shortages leading to a hike in prices. So the government is of the view that the change in the law and policy will contribute to the reduction of the pump prices by eliminating unwarranted transactions in the supply chain.
By granting UNOC exclusive authority, the government says it will mobilize additional revenue to UNOC where new revenues will be earned through participation in the importation supply chain and ultimately support financing of other infrastructure projects where UNOC holds interest on behalf of the State. Uganda Fuel Imports Uganda is currently a net importer of petroleum products, where more than 90% are imported through the Mombasa port in Kenya and the rest through the Dar-es-Salaam port in Tanzania.
The importation is done independently by the licensed Ugandan Oil Marketing Companies (OMCs) through the importation structures in Kenya and Tanzania.
Under the existing importation structures, the Ugandan Oil Marketing Companies have been accessing their petroleum products import allocations through their affiliated Kenyan Oil Marketing Companies registered and participating in Kenyan and Tanzanian import structures.
In April 2023, the Government of Kenya made changes to the petroleum products import system by replacing the Open Tender System with the Government-to-Government importation arrangement with the Governments of the United Arab Emirates and the Kingdom of Saudi Arabia to manage some of the importation challenges that Kenya was facing.
According to Nankabirwa, despite the price-competitive nature of the Open Tender System in Kenya and its relatively normal supplies, it exposed Uganda to occasional supply vulnerabilities where the Ugandan Oil Marketing Companies were considered secondary whenever there were supply disruptions.
“These vulnerabilities paused additional challenges, resulting in Uganda receiving relatively costly products and ultimately impacting the retail pump prices” said Nankbirwa.
She explained that with the amendment of the Petroleum Supply Act, the Ministry of Energy and Mineral Development shall maintain its overall responsibility of regulating the importation of petroleum products into Uganda.
Under the proposed arrangement, the Uganda National Oil Company (UNOC) will be responsible for sourcing and supplying petroleum products to the licensed Oil Marketing Companies (OMCs) involved in importing the products to Uganda.
