Uganda is taking steps to reduce its dependence on Kenya for oil supplies to zero. Among other things, the Ugandan government intends to transfer the crude oil transit point to Tanzania.
The Ugandan authorities have designated the Tanzanian port of Dar es Salaam as the main transit point for oil imported from Gulf countries, abandoning the use of the Kenyan port of Mombasa, announced Ugandan Energy Minister Ruth Nankabirwa on her official account following her meeting with Tanzanian President Samia Suluhu Hassan.
Indeed, the distance between Dar es Salaam and the Ugandan oilfields is shorter than that to the port of Mombasa, which should lead to lower fuel prices in Uganda.
This decision is part of Uganda's strategy to "put an end to a system that supplies petroleum products via neighboring Kenya", announced in early November by the Ugandan Minister of Energy, Ruth Nankabirwa.
To guarantee security of supply, Vitol Bahrain and the Uganda National Oil Company (ONUC) will establish "buffer stocks" in Uganda and Tanzania, Ms Nankabirwa was quoted by the media as saying.
Uganda's decision to abandon the port of Mombasa could cost Kenya up to $100 million a year. Around 40% of Kenya's fuel imports are re-exported, mainly via Uganda, to the Democratic Republic of Congo and South Sudan, according to media reports.
The country's government has also handed over exclusive rights to supply petroleum products to international trader Vitol Bahrain, which is expected to consider investments in Uganda's oil sector.
"ONUC and Vitol Bahrain have negotiated a five-year contract, and the partner will finance the venture by providing working capital," Ms Nankabirwa had said on October 31. The first exclusive deliveries to ONUC are expected in January, said the Ministry of Energy spokesman.
Dependency of Kenyan companies
According to the Minister, for decades Uganda had not been autonomous in its decisions regarding the supply of petroleum products; it depended on Kenyan intermediaries.
"Kenya has been deciding for decades which petroleum products Uganda buys, when, from where, how much, who buys them and at what price," she complained, quoted by the media.
Kenyan-affiliated companies were importing oil on their behalf via the Kenyan port of Mombasa, and then delivering it to Ugandan companies. This system, which accounted for 90% of the country's fuel imports, exposed it to supply disruptions and affected retail prices, said the Energy Minister.