Uganda

Uganda seeks fixed fuel quota from Kenya to address shortage

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Oil tankers delivering fuel to Uganda queue at the Busia border in Kenya. FILE PHOTO | NMG

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Summary

  • Uganda has asked Kenya, its main route for oil imports, to allocate it fixed monthly transit petroleum product quotas to ease shortages amid growing anxiety in Kampala over a fuel crisis.
  • Uganda, which accounts for 75 percent of fuel transported through Kenya, also wants a guarantee of a monthly provision of 12,000 cubic metres of aviation fuel.
  • Uganda also wants its oil marketing firms to continue being supplied under the open tender system through their sister companies in Kenya.

Uganda has asked Kenya, its main route for oil imports, to allocate it fixed monthly transit petroleum product quotas to ease shortages amid growing anxiety in Kampala over a fuel crisis.

Kampala in a letter to officials in Nairobi has demanded a fixed allocation of 110,660 cubic metres of petrol and 110,400 cubic metres of diesel transported through Kenya to satisfy fresh demand following the reopening of its economy from the coronavirus lockdowns.

Uganda, which accounts for 75 percent of fuel transported through Kenya, also wants a guarantee of a monthly provision of 12,000 cubic metres of aviation fuel.

“We are hopeful that some of these action areas could enable us address petroleum product supply problems in Uganda,” Ugandan Energy Permanent Secretary Pauline Irene Batebe said in the letter to her counterpart in Kenya.

Ms Batebe said the demands come after a meeting by oil marketers operating in Kampala linked the fuel supply crisis facing the country to inadequate allocations from Kenya.

“During the time we experienced Covid-19 restrictions in 2020 and beginning of 2021, there was a reduction in demand for petroleum products and when businesses returned to normal in the fourth quarter of 2021 Ugandan Oil marketing companies have continued to inadequate ullage which has caused gaps in fulfilling their demand requirements and therefore resulted in persistent supply problems in Uganda,” said Ms Batebe said.

The letter dated April 11 is addressed to Kenya’s Energy Principal Secretary Andrew Kamau. Uganda’s Ministry of Energy spokesperson Solomon Muyita confirmed the authenticity of the contents of the letter seen by the Business Daily.

“Yes the letter is authentic,” Mr Muyita told the Business Daily. It was not immediately clear whether Kenya will act on Uganda’s demands.

Uganda also wants its oil marketing firms to continue being supplied under the open tender system through their sister companies in Kenya. It also wants all Ugandan oil firms to be allowed to load from Nairobi and other terminals in view of the low capacity in western Kenya.

Kenya, a net importer of fuel, has also been struggling with its own supply issues.

Kenya’s three-week fuel crisis, blamed on fuel hoarding by oil marketing firms, has since eased as supplies to petrol stations improve after the government raised pump prices.

The Ministry of Petroleum yesterday said that Kenya had 82,177,000 litres of diesel and a further 52,900,000 litres of petrol at Kenya Pipeline Company’s depots as at Monday evening.

“It is clear that the supply of petroleum products to the country is well within plan. The government once against reiterates that there is adequate availability of the products at the points of use,” Energy Cabinet Secretary Monicah Juma said in a statement yesterday

Dr Juma said the government was investigating the players in the sector with a view of punishing offenders.

The Energy and Petroleum Regulatory Authority (Epra) said that oil marketers that increased fuel exports from last month would have their allocations slashed and handed over to dealers who recorded increased sales locally in a bid to ease the ongoing fuel shortage, the State announced earlier.

Epra said the changes would be effected in the next three import cycles as the State moves to punish dealers behind the ongoing nationwide shortage.

The energy regulator said investigations revealed that several dealers gave priority to the export market in quiet protests over delayed compensation from the State for the unchanged prices.

Oil marketers traditionally allocate 65 percent of their fuel imports to the local market and 35 percent to the transit market.

A number of the marketers increased the share of fuel they sell to the neighbouring countries to over 60 percent to ease their cash crunch given that they are paid instantly unlike in Kenya where the State compensation delays.

The shortage crippled some transport firms and opened an avenue for some dealers to raise prices above the caps set by Epra, with a litre of petrol retailing at Sh200 in some parts of Kenya.

Diesel and petrol shortages first hit the country in the last week of March but eased after the government partly paid the arrears to the oil firms.

A number of the marketers increased the share of fuel they sell to the neighbouring countries to over 60 percent to ease their cash crunch given that they are paid instantly unlike in Kenya where the State compensation delays.

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