Uganda's cabinet has approved a bill to be tabled in the country's National Assembly that would cut its reliance on Kenya for fuel imports.
In the proposed bill, the Uganda National Oil Company (UNOC) will be mandated with sourcing and importing petroleum products for oil marketing companies (OMCs) in the country.
In a statement released by the country's Energy Minister Ruth Nankabirwa Ssentamu, Uganda remarked that the country has in the past months faced costly pump prices and supply challenges following Kenya's government-government oil deal with Saudi and United Arab Emirates (UAE) firms.
"Despite the price-competitive nature of the Open Tender System in Kenya and its relatively normal supplies, it exposed Uganda to occasional supply vulnerabilities where the Ugandan OMCs were considered secondary whenever there were supply disruptions," Dr Ssentamu stated.
"These vulnerabilities paused additional challenges, resulting in Uganda receiving relatively costly products and ultimately impacting the retail pump prices."
According to the minister, Uganda imports 90.0 per cent of its petroleum products through Mombasa Port while the rest comes through Dar es Salaam.
The fuel sold in Uganda is supplied by Kenyan OMCs to their affiliates in the neighbouring country. The minister now wants UNOC to source the products and supply them to local OMCs.
This would be a blow to Kenyan OMCs with outlets in Uganda as they would be forced to take part in a separate import deal with UNOC.
"The Uganda National Oil Company (UNOC) will be responsible for sourcing and supplying petroleum products to the licensed Oil Marketing Companies (OMCs) involved in importing the products to Uganda," the minister noted.
"Therefore, the OMCs will continue selling the products to consumers through their commercial arrangements and the retail fuel pumps."
UNOC has also entered a deal Vitol Bahrain E.C. to help in sourcing and importing oil for the East African country. The Bahraini company will maintain reserves in Uganda and Tanzania, further cutting the flow of the products through Kenya.
"To guarantee the security of supply, the partnership has ensured that there will be buffer stocks in Uganda and Tanzania to be called upon should there be supply disruptions to the country. The Partner has also committed to finance the construction of additional capacity in partnership with UNOC of 320 million litres at Namwambula, Mpigim," Ssentamu remarked.
In April this year, Kenya entered a deal with four Gulf suppliers namely, Saudi Aramco, Emirates National Oil Corporation (Enoc) and Abu Dhabi National Oil Corporation Global Trading (Adnoc) quitting the Open Tender System previously used.
This was in a bid to quit dependency on dollars and to curb the drop in the Kenyan shilling against the dollar.
