First batch of Uganda oil imports near Mombasa port, ends Kenya monopoly

By The East African

Two tankers carrying the maiden consignment of petroleum products directly imported by Uganda will dock at the Mombasa port next week, marking an end to the monopoly long enjoyed by Kenya oil marketers.

The imports are part of a negotiated deal between Uganda National Oil Company (Unoc) and Vitol Bahrain that targets to lower pump prices below the current rates offered by dealers in Kenya.

Unoc Chief Corporate Affairs Officer Tony Otoa said two vessels will dock in Mombasa on July 2.

“We expect the first vessel carrying 70,000 tonnes and this will continue to ensure stability in fuel supply to the country,” he said.

The Uganda shipment will be delivered through the Kipevu Oil Terminal 2 (KOT2) and use Kenya Pipeline Company (KPC) facilities to transport it to Uganda.

On Friday, Unon, Kenya Ports Authority (KPA), and Kenya Revenue Authority (KRA) among other stakeholders held a final meeting in Mombasa before the arrival of the two vessels.

But while Unoc’s entry into Kenya as a direct importer will hurt local oil firms, KPC will not suffer any revenue losses, given that the Ugandan company will continue using its storage facilities and transport network to ship the fuel to the neighbouring country.

This is a win-win agreement between Kenya and Uganda with KPA pledging to offer efficient services to cut the cost of handling fuel.

KPA Managing Director Capt William Ruto said the deal is part of the plan to increase fuel throughput to Uganda.

“It’s true Uganda is bringing their own vessel. This has been made possible and easy because we can handle up to four vessels at any given time,” he said.

KPA boasts the Ksh42 billion KOT2 which consists of four berths with a total length of 770 metres and a workboat wharf at Westmont for landing facilities. The terminal can accommodate three ships concurrently, each with a capacity of 200,000 tonnes.

The facility has five sub-sea pipelines and six onshore pipelines connecting the terminal to the Kenya Petroleum Refineries Limited and the KPC’s storage tanks.

The KOT 2 terminal can handle six different hydrocarbon import and export products, including aviation fuel, diesel, and petrol, and will be fitted with a Liquid Petroleum Gas facility, crude oil, and heavy fuel oil.

Kenya has proved capable of handling huge volumes of petroleum products with KPC having 45 tanks with a total storage capacity of 484 million litres out of which 254 million litres are reserved for refined products.

According to the sale and purchase agreement obtained by this publication, Uganda chose Kenya over Tanzania due to its investment at the port and its proximity to the country.

“Unoc is mandated to ensure security of supply of the petroleum products into the country. Unoc will therefore keep both the Kenyan and Tanzanian routes active, although supplies through Kenya may be prioritised,” read the communication from Unoc.

On whether Uganda will handle any consignment from foreign OMCs it said, “Unoc is mandated to only transact with Ugandan OMCs and shall therefore not be able to, say, invoice a foreign entity. We have made provision for the Ugandan OMC to process the product payment through an affiliated entity who will be required to undergo clearance through the Know Your Customer (KYC) document.”

The Uganda government said Unoc expects the OMCs that submitted their company details and requirements in the KYC document sent on 3rd May 2024 (after the meeting of 2nd May 2024) to sign the SPA.

On the criteria of allocating fuel imported in the arrangement, Unoc for the first months will consider ranking by historical importation figures, market presence, and indicated interest backed with demonstrated financial strength.

Uganda has been seeking alternative ways of importing petroleum products, including through a Tanzanian port after its oil retailers for decades received their cargo through affiliated firms in Kenya.