Kenya rejects Uganda’s lower fees push in direct fuel import

The charges—part of the tariffs gazetted by Energy and Petroleum Regulatory (Epra)—, however vary based on the loading depot.

Uganda had, while negotiating with Kenya for Unoc’s licence, reportedly pushed for preferential tariffs for the use of KPC’ network, a move that would have hurt the revenues that Kenya makes from handling and transporting transit fuel.

Kenya had since September last year declined to issue Unoc with the licence needed to access KPC’s facilities, prompting Uganda to move to the regional court.

Read: PRIME How Kenya averted fuel pile-up on exit of Uganda

But Kenya gave Unoc the licence in March, paving the way for the Ugandan oil firm to start directly importing fuel through the port of Mombasa.

“KPC’s transport and storage tariffs are not linked to the Uganda supply deal (with Vitol Bahrain). KPC made a business decision (with Epra’s approval) to discount transit fees so as to promote use of the Kenya corridor compared to the central corridor of Dar es Salaam,” Daniel Kiptoo, Director-General of Epra said.

Oil marketers pay $31.42 (Sh4,175.08 at current exchange rates) per cubic metre for use of KPC’s depot in Nakuru and $37.79 (Sh5,021.53 at current exchange rates) for similar volumes of fuel at the Kisumu oil terminal.

“The tariffs were not changed. They remain the same as passed by Epra a while ago,” said another source who spoke to this publication.
Uganda had initially said it would use the port of Dar es Salaam to import the fuel amid delays by Kenya to issue Unoc with the licence. But the neighbouring country made a U-turn and stuck to the port of Mombasa given the superior facilities.

Kenya currently charges discounted rates on transit fuel, a decision that was made years ago in a bid to boost attractiveness of the port of Mombasa and ward off competition from the port of Dar es Salaam.

Uganda had hoped to have a bigger say in determining pump prices in Kampala, through the direct import deal with Vitol Bahrain.
 However, with KPC sticking to the existing tariffs for transit fuel, Uganda’s hopes of ensuring cheaper fuel in Kampala lies in the prices that the neighboring country agreed with Vitol Bahrain.

For example, under the government-backed deal that Kenya re-negotiated with the Gulf oil firms last year, premiums for super petrol rose to $90 from $97.5 while those for diesel were cut to $88 from $118. Premiums for jet fuel were slashed to $111.75 from $114.25.

Kenya started the deal with Saudi Aramco, Emirates National Oil Company and Abu Dhabi National Oil Company in March last year.

Read: Oil dealers in panic as Uganda picks Tanga port over Mombasa

The initial premiums had been blamed for being a significant contributor to the high pump prices that consumers faced last year when fuel costs breached the Sh200 per litre for the first time in Kenya’s history.

 Unoc has already been granted ullage and line fill at the KPC’s network, in readiness to start the direct importation of fuel.

Line fill is the minimum volume of a fuel which is needed to occupy the physical space of a pipeline for its efficient flow while ullage refers to the empty air space in a tank or pipeline to allow for the fuel to expand.

KPC handles at least 90 percent of the fuel that Uganda imports, with the rest being handled through the port of Dar es Salaam.

Unoc will between 18th and 26th next month receive the first cargoes of fuel under a five-year deal that was signed with Vitol Bahrain.
Ugandan authorities have publicly said that start of the deal with Vitol Bahrain will help lower pump prices in Kampala.

The current tariffs that KPC’s charges oil marketers for handling local and transit fuel came into force in October 2022 and will lapse in June next year.

Epra is then expected to set and gazette the new charges that KPC will charge oil marketers for handling both local and transit fuel.

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