Uganda plans to hand over exclusive rights for supply of all petroleum products to a unit of global energy trader Vitol and end a system that sources the oil products through neighbouring Kenya, Uganda’s energy minister said.
Fuel companies in the landlocked East African nation buy their supplies through affiliated firms in Kenya that import the product on their behalf through Mombasa port.
That system, which accounts for 90% of Uganda’s fuel imports, exposes it to supply disruptions and high pump prices, Energy Minister Ruth Nankabirwa said in a statement.
“UNOC and Vitol Bahrain E.C. have negotiated a five-year contract, and the Partner (Vitol) will be financing the business by providing a working capital,” she said late on Tuesday.
According to central bank data, Uganda imported $1.6 billion worth of petroleum products in 2022.
The cabinet has approved changes to the petroleum law that will allow Vitol to exclusively supply the state-owned Uganda National Oil Company (UNOC), the minister said.
UNOC will in turn sell the products to petrol station operators.
To guarantee the security of supply for Uganda, Vitol and UNOC will establish ” buffer stocks” in Uganda and neighbouring Tanzania, Nankabirwa said.
The legal changes that will buttress the deal were presented to parliament on Tuesday for its approval, the minister said, without giving a date for the parliamentary vote.
Vitol and UNOC had already signed the contract and first exclusive supplies to the state firm were expected in January, an energy ministry spokesperson said.
Using Kenyan importers had “exposed Uganda to occasional supply vulnerabilities where the Ugandan retail companies were considered secondary whenever there were supply disruptions,” which affected retail prices, Nankabirwa said.
In March, Kenya entered a deal with Saudi Aramco (2223.SE), Abu Dhabi National Oil Company (ADNOC.UL) and Emirates National Oil Company, switching from an open tender system in which local companies bid to import oil every month.
Kenya’s Energy and Petroleum Regulatory Authority had no immediate comment on Uganda’s proposed changes.