Energy Sector Faces Monopoly Concerns

Storage terminals UNOC
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The Minister of Energy, Ruth Nankbirwa, has presented the Petroleum Supply (Amendment) Bill, 2023 to the Parliament for its First Reading. If passed in its current form, this bill will provide Uganda National Oil Company (UNOC) with exclusive authority to supply imported petroleum products to licensed oil marketing companies. Public hearings are expected in parliament.

The Ministry of Energy insists that the primary goal of this bill is to grant UNOC the exclusive authority to import petroleum products. However, some industry players have raised concerns that it might lead to a fuel importation monopoly controlled by Vitol Bahrain E.C, a Bahrain-based company.

The petroleum product importation and marketing sector in Uganda has been characterized by liberalization, with multiple private entities participating in the business. The proposed bill has raised fears among some private players that their businesses might be impacted by this policy change.

One outspoken critic of the proposal is Mahathi Infra (U), which transports oil via tanker ships on Lake Victoria. Captain Mike Mukula, one of the company’s directors, warns that creating a UNOC monopoly could harm investors and infrastructure in the fuel importation business.

The Ministry of Energy, on the other hand, emphasizes the strengths of Vitol Bahrain E.C, citing its $505 billion turnover in 2022 and its commitment to building UNOC’s capacity. Additionally, the ministry asserts that Vitol Bahrain E.C will help ensure competitive pricing of petroleum products and support the construction of additional capacity at Namwambula, Mpigi.

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The bill aims to assign UNOC as the sole importer of petroleum products for Uganda, empower the Minister to nominate other entities for importing petroleum products, enhance supply security, reduce pump prices, and generate 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 expects that UNOC’s involvement in the importation supply chain will generate additional revenue to finance other infrastructure projects. The amendment seeks to authorize the Minister of Energy, with Cabinet approval, to nominate other entities for petroleum product imports.

This change in the law and policy is anticipated to contribute to the reduction of pump prices by eliminating unwarranted transactions in the supply chain. Uganda, a net importer of petroleum products, has faced fuel shortages that have led to price hikes in the past.

Under the existing importation structures, licensed Ugandan Oil Marketing Companies access their petroleum product imports through affiliated Kenyan Oil Marketing Companies. However, changes in Kenya’s petroleum products import system have exposed Uganda to occasional supply vulnerabilities.

With the proposed amendment, UNOC will be responsible for sourcing and supplying petroleum products to licensed Oil Marketing Companies involved in importing products to Uganda, which is expected to address some of the supply vulnerabilities faced in the past.

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