Just days after Uganda received its first oil consignment directly from the refineries in the United Arab Emirates and Kuwait to curb fuel shortages and ensure low pump prices, the Kenyan government has hiked bond fee at the Vitol terminal in Mombasa.
Vitol imports Uganda’s fuel from the refineries for the Uganda National Oil Company (UNOC) which the Petroleum Supply Amendment Act 2023 gives exclusive rights to import and supply petroleum products in Uganda.
The move was aimed at addressing long-standing issues such as overpricing of fuel by Kenyan middlemen and supply instability, which have led to frequent fuel price hikes in Uganda.
The Ugandan Minister of Energy and Mineral Development, Ruth Nankabirwa has since criticised Kenya’s move, saying that she is heading back to Nairobi for further negotiations.
“We expect the prices to be manageable, to be more competitive for as long as we are not pushed to incur costs at the port because as I speak now, I will be going back to Kenya to meet my colleague, because of one thing; they have increased the bond fee at Vitol terminal where we are going to offload our products,” she said.
“When you increase the bond fee to the tune of 40 million US dollars, then that means that you are pushing UNOC to also increase, and therefore, Ugandans are likely not to see a reduced pump price,” she added.
“So, I am still in negotiations with the Kenyan government to make sure that they don’t force on us this kind of thing. The bond fee at VTTI in Mombasa, that is Vitol terminal in Mombasa where we are storing our products; 40 million dollars is a deterrent. And this is not how the East African Community spirit should operate,” she added.
Uganda’s aimed to reduce pump prices, hence the move to source petroleum products directly from the refineries.
This, however, Nankabirwa said can only be achieved if all factors remain constant.
“Yes we will see competitive prices if all factors remain constant. One factor is already not constant, they have increased the bond fee; that must be felt at the end user price…Let Ugandans wish me success in my negotiations so that the bond fees go down.”
In 2022, UNOC and Vitol Bahrain E.C. negotiated a five-year contract with the Swiss-based Dutch oil trading company financing the business by providing a working capital facility backed by its global balance sheet and working with UNOC to ensure competitive pricing of petroleum products.
Vitol buys or guarantees the purchase of petroleum products from refiners in the Middle East and supplies them to UNOC, a government body.
UNOC then sells these products to oil marketing companies operating in Uganda such as Total Energies, Oryx and Vivvo among others.
Museveni defended the government’s decision to import its petroleum products and gave a comparison of prices of different petroleum products sold by middlemen and bulk suppliers or refiners, saying Uganda will get a better deal from the latter.
- Diesel: Middlemen’s price – $118; Price from bulk suppliers or Refiners -$83;
- Petrol: Middlemen’s price -$97.5; Bulk suppliers or Refiners’ price- $61.5;
- Kerosene: Middlemen’s price – $114; Bulk suppliers or Refiners’ price – $79
“These are prices when the products have arrived at the East African Ports. You can see the huge loss Uganda has been incurring on account of our wonderful People,” said Museveni last year.
Kenya had at first blocked Uganda’s move to cut out middlemen only to give away following discussions between President Museveni and William Ruto.
The second fuel-laden vessel arrived last Thursday morning at Mombasa, Kenya, as UNOC started implementing the sole importation of petroleum (fuel) mandate.
Sinbad from Kuwait was carrying 80,000 metric tonnes of diesel destined to Uganda.
Like Martinez, the first one, its cargo was discharged into the Kenya Pipeline Company infrastructure, delivering it to Eldoret, Kisumu and Nakuru in Kenya ahead of transportation to Uganda by trucks.
The first ship arrived from Jebel-Ali, United Arab Emirates with 58,000 metric tons of petrol last Wednesday.
The trucks which deliver oil products to Uganda are hired by Ugandan Oil Marketing Companies (OMCs).
By 01 July 2024, there were 80 OMCs.
In 2023, Uganda Manufacturers Association (UMA) urged government to consider retaliation mechanisms against the Government of Kenya, for what they termed as ill treatment of Uganda and severe injury to investment.
This followed the persistent ban on Ugandan exports to Kenya scuh as maize, wheat and milk products.
The ban on milk exports to Kenya in March 2023 grossly affected trade with companies like Brookside Uganda laying off half of their employees.
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