Uganda has chosen the Dar es Salaam port in Tanzania as its new entry point for oil imports, cutting ties with Kenya in a move that is likely to have significant implications for the East African region.
The decision follows a contract between Uganda National Oil Company (UNOC) and Vitol Bahrain, which gives the latter the exclusive right to supply oil to Uganda. Vitol Bahrain has pledged to fund a joint project with UNOC to expand the Namwambula Mpili storage facility in Tanzania by 320 million liters.
Uganda’s decision to switch to Dar es Salaam is motivated by a number of factors, including:
- To reduce reliance on Kenya: Uganda has long been dependent on Kenya for its oil imports, but the relationship between the two countries has become strained in recent years. In 2021, Uganda accused Kenya of delaying the construction of a pipeline that would transport Ugandan oil to the Kenyan coast for export.
- To strengthen ties with Tanzania: Uganda has been seeking to deepen its ties with Tanzania in recent years. The two countries have signed a number of cooperation agreements, including a joint venture to build a railway line connecting their capitals.
- To access cheaper oil: Uganda believes that it can import oil more cheaply through Dar es Salaam than through Mombasa, Kenya’s main port. This is because the distance between Dar es Salaam and Uganda’s oil fields is shorter than the distance between Mombasa and the oil fields.
The switch to Dar es Salaam is likely to have a number of implications for the East African region. First, it could lead to lower fuel prices in Uganda, as the country will be able to access cheaper oil. Second, it could boost economic activity in Tanzania, as the country will become a major hub for oil imports. Third, it could strain relations between Uganda and Kenya.
Kenya has already expressed its disappointment with Uganda’s decision. The Kenyan government has argued that the switch to Dar es Salaam will hurt the economies of both countries. However, Uganda has maintained that the move is in its best interests.
The switch to Dar es Salaam is a significant development for the East African oil market. It is a sign that Uganda is becoming more assertive and is willing to make tough decisions to protect its own interests. It is also a sign that the East African oil market is becoming more competitive.
Implications for the East African region
The switch to Dar es Salaam is likely to have a number of implications for the East African region.
- Lower fuel prices in Uganda: Uganda believes that it can import oil more cheaply through Dar es Salaam than through Mombasa. This could lead to lower fuel prices in Uganda, which would benefit consumers and businesses alike.
- Boosted economic activity in Tanzania: The switch to Dar es Salaam could boost economic activity in Tanzania, as the country will become a major hub for oil imports. This could create jobs and attract new investment.
- Strained relations between Uganda and Kenya: The switch to Dar es Salaam could strain relations between Uganda and Kenya. Kenya has already expressed its disappointment with Uganda’s decision, and it is possible that the two countries could engage in retaliatory measures.
- More competitive East African oil market: The switch to Dar es Salaam is a sign that the East African oil market is becoming more competitive. This could benefit consumers and businesses alike, as it could lead to lower prices and better services.
The switch to Dar es Salaam is a significant development for the East African oil market. It is a sign that Uganda is becoming more assertive and is willing to make tough decisions to protect its own interests. It is also a sign that the East African oil market is becoming more competitive.
It remains to be seen what the long-term implications of the switch will be. However, it is clear that the decision is a major turning point for the East African region.