Uganda chooses Tanzania for its oil imports after fallout with Kenya

Uganda and Vitol Bahrain E.C., a Bahrain-based company have chosen the Dar es Salaam port in the capital city of Tanzania as its entry point for its oil imports.

This was done in an effort to foster the relationship between both East African countries. The move follows Vitol Bahrain’s procurement of a contract from Uganda National Oil Business (UNOC), that allows it to supply Uganda’s oil, marking a shift in Uganda’s energy sector. This decision follows a fallout with Kenya over its government-to-government fuel deal with two Gulf nations, which was made without consulting Uganda. Given Uganda imports 90% of its fuel via Kenya, this move is a strategic effort to reduce dependence and ensure a stable oil supply.

The move also precedes Uganda’s decision to end its dependence on Kenya for its oil imports. A few weeks ago, a bill allowing Uganda National Oil Business (UNOC), a state-owned oil company, to purchase and deliver oil to the country’s internal market was approved by the Ugandan cabinet.

Addressing the situation, the Ugandan government has partnered with Vitol Bahrain E.C. to import oil through the Tanzanian port. The Bahrain-based firm will finance the partnership and extend an additional 320 million liters of storage capacity. This move aims to not only guarantee oil availability in Uganda but also cater to the entire East African region, thus opening up competition for fuel markets in South Sudan, Rwanda, and Congo DR.

Regarding a hidden agreement Kenya made with the UEA and Saudi Arabia, Ugandan authorities and oil merchants voiced their dissatisfaction with Kenya. The Ugandan officials pointed out that the agreement would expose neighboring nations to high pump costs.

According to Uganda’s President, Yoweri Museveni, it is more cost-effective for Uganda to purchase from refineries abroad and transport the product to Uganda via Kenya and Tanzania, which imports USD 2 billion in petroleum products each year, has been sourcing the same products from middlemen in Kenya at exorbitant prices, exacerbating the country’s fuel crisis.

“Without my knowledge, our wonderful People, were buying this huge quantity of petroleum products from middlemen in Kenya. A whole country buying from middlemen in Kenya or anywhere else!! Amazing but true”. Museveni said.

Museveni claims that Uganda has already contracted bulk and refinery suppliers in order to obtain lower prices for the products.

This schism also has the potential to affect dollar exchange rates between the two countries at a time when the government sorely needs the greenback to pay for petroleum imports.

All petroleum products are imported and used for trade in Uganda. Dr. Nankabirwa claims that the port of Mombasa in Kenya gets around 90% of these goods, with the remaining 10% arriving via the port of Dar es Salaam in Tanzania.

This information originated from details received from meeting minutes obtained by the Kenyan news website Business Daily.

Vitol Bahrain has now promised to fund a collaborative project at Namwambula Mpili with UNOC in order to expand the facility’s capacity and add 320 million liters of storage capacity.

Vitol Bahrain, an independent worldwide firm with a significant presence in the East African nation, is characterized by Dr. Nankabirwa as a strategic partner with a projected turnover of $505 billion in 2022.

Uganda’s decision to import oil through Tanzania is a strategic move to reduce reliance on Kenya and ensure a stable oil supply. By diversifying its import routes, Uganda aims to avoid potential supply disruptions and price fluctuations. The fallout with Kenya over the unconsulted fuel deal underscored the need for Uganda to diversify its import routes and lessen its dependence on Kenya. Furthermore, the move is expected to open up competition in the fuel markets of South Sudan, Rwanda, and Congo DR, which were previously dominated by Kenya as the primary fuel supplier.

Moreover, the Ugandan government plans to enable the state-owned UNOC to take over all petroleum product importation into the country. UNOC will source all petroleum products exclusively from Vitol, a Swiss-based Dutch global energy and commodities giant. This initiative aims to ensure better importation control and potentially lower fuel prices for consumers. Viewed as a long-overdue reform in the fuel import sector, this move is expected to provide financial benefits to the country by opening up a new revenue stream and ensuring competitive pricing of petroleum products.