By ANTHONY KITIMO

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Uganda will use Kipevu Oil Terminal 2 and the Kenya Pipeline Corporation infrastructure to ferry petroleum products from Mombasa to Kampala.

According to the Uganda National Oil Corporation (Unoc), no Kenyan oil marketing company will be involved in the Unoc-Vitol Bahrain deal that target to lower pump prices below the current rates offered by dealers in Kenya.

Next week, Uganda will receive the first two vessels at the port of Mombasa; Navig8 Matines on 2nd July 2024, carrying 58,000 metric tonnes (MT) of petrol and MT Sinbad will dock on 3rd July 2024, carrying 65,000MT of diesel.

Kenya over Tanzania

According to the Sale and Purchase Agreement (SPA) seen by The EastAfrican, Uganda chose Kenya over Tanzania due to its investment at the port and proximity.

On whether Uganda will handle any consignment from foreign OMCs it said, “Unoc is mandated to only transact with Ugandan OMCs and shall therefore not be able to, say, invoice a foreign entity. We have made provision for the Ugandan OMC to process the Products payment through an affiliated entity who will be required to undergo clearance through the know your customer (KYC) document.”

The Uganda government said Unoc expects the OMCs that submitted their company details and requirements in the KYC document to sign the SPA.

Unoc will initially consider ranking by historical importation figures, market presence, and indicated interest backed with demonstrated financial strength.

Uganda has been seeking alternative ways of importing petroleum products, including through a Tanzanian port, because its oil retailers have for decades received their cargo through affiliated firms in Kenya.

Unoc, Kenya Ports Authority, Kenya Revenue Authority and other stakeholders held a final meeting in Mombasa ahead of the arrival of the two vessels.

Unoc chief corporate affairs officer Tony Otoa said two vessels, MT Navig8 Martinez and MT Sinbad will dock in Mombasa on July 2-3 marking the first consignment being handled directly by Unoc.

“Unoc will work to ensure stability in fuel supply to the country. We have concluded all legal and other arrangements to receive the two vessels,” said Mr Otoa.

But while Unoc’s entry into Kenya as a direct importer will hurt local oil firms, KPC will not suffer any revenue losses, given that the Ugandan company will continue using its storage facilities and transport network to ship the fuel to the neighbouring country.

Planned increase

KPA managing director Capt William Ruto said the deal is part of the plan to increase throughput of fuel to Uganda

“It’s true Uganda is bringing their own vessel. This has been made possible and easy because we can handle upto four vessels at any given time,” said Mr Ruto.

Uganda kicked off plans for the direct imports deal through Unoc months after Kenya announced an agreement with Gulf majors to import fuel on a 180-day credit period to ease dollar demand and prop up the shilling.

Kenya started the government-backed deal with Saudi Aramco, Abu Dhabi National Oil Corporation, and Emirates National Oil Company in April 2023.

Late last year, Uganda made a policy shift in the manner in which it sources, imports and supplies petroleum products by making Unoc the sole importer and supplier of all petroleum products for its market.

In May during President Yoweri Museveni visit to Nairobi, Kenya gave in to Uganda’s demands to import its own refined petroleum products through the Port of Mombasa, amid revival of plans to extend the pipeline to Kampala.

The project is expected to kick off in December this year according to insiders.

The pipeline will extend to Kigali in Rwanda and possibly Bujumbura (Burundi) in the future, with each country responsible for the development of the infrastructure within its borders.

The two countries signed a tripartite agreement that will see UNCO import products through Mombasa, before being moved by Kenya Pipeline infrastructure to Eldoret and Kisumu deports for last-mile delivery by road into Uganda.

The tripartite agreement on the importation and transit of refined petroleum products through Kenya now brings to an end a stalemate between the two countries which heightened in January, after Uganda took Kenya to the East African Court of Justice (EACJ) in January, for refusal to allow its state set base in Kenya.

KPA boasts the $320 million KOT2 which consists of four berths with a total length of 770 meters and a workboat wharf at Westmont for landing facilities. The terminal is able to accommodate three ships concurrently, each with a capacity of 200,000 tons.

The facility has five sub-sea pipelines and six onshore pipelines connecting the terminal to the Kenya Petroleum Refineries Limited and the KPC’s storage tanks.

The KOT 2 terminal is able to handle six different hydrocarbon import and export products, including aviation fuel, diesel, and petrol, and will be fitted with a Liquid Petroleum Gas facility, crude oil, and heavy fuel oil.

Kenya has proved capable of handling huge volumes of petroleum products with KPC having 45 tanks with a total storage capacity of 484 million litres out of which 254 million litres is reserved for refined products.

According to SPA Uganda chose Kenya over Tanzania due to its investment at the port and its proximity to their country.