Africa (Commonwealth Union) _ Uganda’s attempt to use Kenya’s pipeline to transport its fuel was rejected in September, citing concerns about displacing local oil marketing companies (OMCs). Beginning January 1, 2024, Uganda is set to stop purchasing fuel from Kenyan firms. Instead, the country has entered into a five-year contract with Vitol Bahrain E.C to exclusively supply all its fuel needs. This shift marks a significant change in Uganda’s fuel sourcing strategy, considering that approximately 90% of its fuel is currently supplied by Kenya, with the remaining 10% sourced through Tanzania. This decision is likely to have implications for the energy trade dynamics between Uganda and its neighbouring countries.
In September, the Uganda National Oil Company (UNOC) applied to Kenya’s Energy and Petroleum Regulatory Authority (EPRA) to be registered as an Oil Marketing Company (OMC), allowing it to import and export fuel and utilize the Kenya Pipeline Company’s (KPC) pipeline. However, EPRA rejected UNOC’s application, citing an inability to substantiate the required annual sales volumes and failure to meet various operational criteria in Kenya. This rejection adds a layer of complexity to cross-border energy collaborations between the two nations.
Epra’s approval would have displaced Kenyan companies from their pipeline allocations to accommodate UNOC, potentially disrupting OMCs. The rejection is viewed as a measure to avoid nationalization and protect the property rights of existing oil marketers. The impasse continues, with ongoing talks between the two countries, leaving uncertainties about whether Kenya will grant concessions to the Uganda National Oil Company (UNOC) for using Kenya Pipeline Company’s (KPC) facilities for fuel evacuation. This is particularly crucial as Vitol is set to begin deliveries in the coming months. The resolution of this issue requires careful negotiation and diplomatic efforts to find a mutually agreeable solution that meets the interests of both Uganda and Kenya.
