Uganda Parliament Grants UNOC Monopoly Powers in Petroleum Sector Amidst Divided Opinions

The Petroleum Supply (Amendment), Bill 2023 Aims to Tackle Oil Price Fluctuations and Boost UNOC's Negotiating Power

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In a landmark decision, the Ugandan Parliament has approved the Petroleum Supply (Amendment), Bill 2023, granting the Uganda National Oil Company (UNOC) exclusive rights to import and supply all petroleum products destined for the Ugandan market. The move is a strategic effort to eliminate middlemen in the oil supply chain, seen as responsible for the unpredictable fluctuations in oil pump prices.

The Bill, which passed following intense scrutiny by the Committee on Environment and Natural Resources, aims to streamline the petroleum supply chain by allowing UNOC, a government-owned entity established to handle the government’s commercial interests in the petroleum sector, to take charge of the entire process.

Currently, Uganda imports 90 percent of its petroleum products through Kenya and 10 percent through Tanzania. The existing system imposes three layers of middlemen, contributing to the final pump price. According to Hon. Emmanuel Otaala, the chairperson of the Committee, this intricate network of intermediaries has been a major factor in the high and unpredictable pump prices experienced in the country.

The committee’s report highlighted the current inability of Uganda to purchase oil directly from refineries, resulting in additional markups by Kenyan companies and supply insecurity. The proposed Bill, if signed into law, will enhance UNOC’s capital base, enabling it to negotiate fair prices for Uganda and reduce dependency on foreign brokers.

Supporters of the Bill, including MPs like Stephen Baka (NRM, Bukooli County North) and Hon. Alioni Yorke (NRM, Aringa South County), argue that giving UNOC a monopoly will strengthen the country’s position and eliminate the disadvantages posed by foreign brokers. They view it as a crucial step in protecting Uganda’s interests in the petroleum sector.

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However, the Bill has faced opposition from some legislators who argue against the creation of monopolies. Hon. Paul Akamba (NRM, Busiki) presented a minority report, citing past negative experiences with monopolies in Uganda. He contends that monopolies can hinder fair competition and potentially lead to economic drawbacks.

One contentious point revolves around UNOC’s agreement with the international oil company Vitol. Due to UNOC’s current financial constraints, Vitol will act on its behalf to purchase oil from international refineries, raising concerns among some MPs, including Hon. Nathan Nandala-Mafabi (FDC, Budadiri County West). Nandala-Mafabi expressed fears that this arrangement might benefit Vitol more than Uganda, potentially leading to higher fuel prices.

The Bill now awaits Presidential assent, and its implications for Uganda’s petroleum sector remain a subject of intense debate and speculation.

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