The Minister of Energy and Mineral Development, Ruth Nankabirwa has criticized Kenya’s move to hike bond fees at $40m at the Vitol oil storage terminal used to ferry oil from Mombasa to Kampala.
This follows commencement of direct importation of refined petroleum products by Uganda through the Uganda National Oil Company (UNOC).
Last week, Uganda received its first oil consignment directly from the refineries in the United Arab Emirates and Kuwait to curb fuel shortages and ensure low pump prices.
According to UNOC, the fuel will be discharged into the Kenya Pipeline Company infrastructure, enabling delivery to Eldoret, Kisumu, and Nakuru in Kenya for onward transportation to Uganda by fuel trucks.
The imports are part of a negotiated deal between UNOC and Vitol Bahrain aimed at lowering pump prices below current rates offered by dealers in Kenya.
Vitol imports Uganda’s fuel from the refineries for the Uganda National Oil Company (UNOC) which the Petroleum Supply Amendment Act 2023 gives exclusive rights to import and supply petroleum products in Uganda.
Commenting on the levy, Nankabirwa said prices are expected to be manageable and competitive, saying she will be going back to Kenya to negotiate with her Kenyan counterpart.
“We expect the prices to be manageable, to be more competitive for as long as we are not pushed to incur costs at the port because as I speak now, I will be going back to Kenya to meet my colleague, because of one thing; they have increased the bond fee at Vitol terminal where we are going to offload our products.”
“When you increase the bond fee to the tune of 40 million US dollars, that means that you are pushing UNOC to also increase, and therefore, Ugandans are likely not to see a reduced pump price,” she added.
“So, I am still in negotiations with the Kenyan government to make sure that they don’t force on us this kind of thing. The bond fee at VTTI in Mombasa, that is Vitol terminal in Mombasa where we are storing our products; 40 million dollars is a deterrent. And this is not how the East African Community spirit should operate,” she said.
Nankabirwa gave hope to Ugandans that there will be competitive prices if all factors remained constant.
“Yes we will see competitive prices if all factors remain constant. One factor is already not constant, they have increased the bond fee; that must be felt at the end user price…Let Ugandans wish me success in my negotiations so that the bond fees go down,” said Nankabirwa.
She said, “We have no doubt that the change of the importation system for petroleum products destined for Uganda from the G2G arrangement to importation by UNOC will face operational challenges from the start as is always the case with change. We however commit to work with the Government of Kenya and the relevant authorities to support UNOC to implement the policy change and achieve the desired objectives.”
The new import deal, symbolizes the beginning of a new era of energy independence for Uganda, which has been importing its oil products through private enterprises.
Government is optimistic that the move will fortify the the country’s ability to ensure consistent supply of petroleum products.
Almost 90 percent of Uganda’s petroleum imports currently pass through Kenya.