On Monday, October 30, 2023, the Ugandan government is set to convene a significant meeting with over 40 private fuel companies operating under the Sustainable Energies and Petroleum Association (SEPA). The primary focus of this meeting is to deliberate on a Cabinet resolution concerning the importation and supply of petroleum products within the country.
The New Importation Plan
The Uganda National Oil Company (UNOC), a government entity responsible for managing the nation’s interests in the petroleum sector, will be leading this discussion. As part of this new plan, UNOC will assume the exclusive role of importing refined petroleum and related products. This marks a significant shift from the current arrangement, where Swiss-based Dutch global energy and commodities giant, Vitol Group, handles the importation and supplies private oil marketing companies (OMCs) in Uganda.
Under the existing system, Ugandan OMCs purchase petroleum products directly from Kenya through an open tender system (OTS). This process is set to be replaced by the proposed change.
Impact on Fuel Supply Chain
The move is expected to bring stability to fuel stocks and address price fluctuations within the country. It also offers a new revenue stream for UNOC, aligning with the government’s goals for a more controlled and secure fuel supply chain.
Industry Reaction and Confirmation
Anthony Ogalo, the chairperson of SEPA, acknowledges the significance of this meeting for OMCs. While the full impact on private importers remains uncertain, Ogalo emphasizes the need to attentively consider the details presented during the meeting.
Irene Batebe, the Permanent Secretary of the Ministry of Energy and Mineral Development, confirms the meeting’s occurrence and elaborates on Vitol’s prior engagement with UNOC. Vitol has supplied bulk petroleum products to UNOC for over a year, following a competitive process in 2021.
Government’s Resolution and Legislative Amendment
This development follows closely on the heels of a briefing by Uganda’s Energy Minister, Ruth Nankabirwa, to Parliament. She apprised the legislative body of Cabinet’s proposal to empower UNOC for exclusive fuel product imports into the country. Cabinet ratified a five-year supply contract between UNOC and Vitol, set to take effect in January 2024.
To facilitate this transition, Minister Nankabirwa intends to present a bill to amend the Petroleum Supply Act of 2006. This legislative change has already received Cabinet’s approval and will empower UNOC to purchase directly from overseas sources, utilizing ports in Mombasa and Dar es Salaam.
Background and Rationale
The need for this adjustment arises from Uganda’s dependence on Kenya for its procurement system for petroleum products. Kenya has historically held the authority to determine the type of petroleum products, their source, and pricing for Uganda. The shift is especially pertinent since Kenya suspended the open tender system (OTS) in favour of a Government-to-Government (G-2-G) import mechanism. This transition means that the Kenyan government directly transacts with oil entities in the Gulf Region and subsequently supplies petroleum to both local and international players.
This strategic realignment is welcomed by President Museveni, who initiated the plan to bolster supply stability and reduce UNOC’s dependence on the national treasury for funding critical projects such as the Kampala Storage Terminal, East African Crude Oil Pipeline (EACOP), and the oil refinery.
Vitol’s Role in the Global Energy Trade
Vitol, a key player in this transition, holds a significant place in the global energy trade. As the largest independent energy trader worldwide, Vitol generates an estimated $500 million in revenue. The company annually ships more than 350 million metric tonnes of crude oil, making it a prominent figure in the international energy landscape.
Key Stakeholders and Entities in the Fuel Importation Transition
| Stakeholder/Entity | Role in Transition |
|---|---|
| Uganda National Oil Company | Leading the transition and sole importer of fuel |
| Vitol Group | Former fuel supplier and part of the transition |
| Sustainable Energies and | Representing over 40 private fuel companies for |
| Petroleum Association | engagement in the transition |
| Ministry of Energy and | Overseeing the transition process and legislative |
| Mineral Development | amendments |
| Private Oil Marketing | Await details and potential impact on their |
| Companies (OMCs) | operations |
| President Museveni | Initiator of the transition plan and its goals |
In this momentous meeting, Uganda is poised to reshape its fuel importation dynamics, a shift that could bring greater stability and control to the nation’s energy sector. The transition, driven by the government and UNOC, has the potential to impact the entire fuel supply chain and foster a more secure, competitive, and domestically controlled energy market.
