Dr. Ruth Nankabirwa Ssentamu, the Minister of Energy and Mineral Development, introduced the Petroleum Supply (Amendment) Bill, 2023 to Parliament for First Reading on Tuesday during the plenary session.
The Uganda National Oil Company (UNOC) will be able to supply licensed oil marketing businesses with imported petroleum products thanks to the proposed legislation.
In light of Uganda’s changing energy landscape, Nankabirwa claims that the Petroleum Supply Amendment Bill will be remembered as a landmark piece of legislation that is both extremely important and desperately needed.
She clarified that the proposed Petroleum Supply Amendment Bill 2023 is a crucial tool for addressing and resolving important concerns in the petroleum supply sector as her ministry navigates the delicate convergence of environmental sustainability, national security, and economic stability.
She said that the measure is essential and that its passage is urgently required to address the serious issues facing Uganda’s gas and energy industry.
The Ugandan people will gain from UNOC’s increased competitiveness on the global stage, according to the government. The bill’s primary objectives are to designate UNOC as the exclusive importer of petroleum products for the Ugandan market, give the Minister the authority to designate other organizations for the purpose of importing petroleum products, improve supply security, lower pump prices, and increase UNOC’s revenue stream to fund infrastructure development.
She informed the House that the bill aims to lessen reliance on external suppliers, streamline the importation procedure, eliminate pointless transactions in the supply chain, and ultimately make petroleum products more affordable for consumers by entrusting UNOC with the responsibility of importing petroleum products.
The administration also expects that by having UNOC participate in the supply chain for imports, it would bring in more money to fund other infrastructure projects in which UNOC is interested on behalf of the State.
Why this is so badly needed, as if it were yesterday
At now, Uganda is in a dependent situation due to its net importation of petroleum products, with more than 90% of its supply coming from the port in Mombasa, Kenya, and the remaining portion coming from the port in Dar es Salaam, Tanzania. Through established mechanisms in Kenya and Tanzania, licensed Ugandan Oil Marketing Companies (OMCs) handle this importation procedure independently.
Ugandan OMCs have historically acquired their petroleum product import allocations under the current importation framework from associated Kenyan OMCs, who are registered players in Tanzanian and Kenyan import structures.
But in April 2023, Kenya’s government initiated a radical change to its petroleum product import system, doing away with the Open Tender System and establishing a Government-to-Government importation agreement in partnership with the governments of the Kingdom of Saudi Arabia and the United Arab Emirates. The urgency with which Kenya was confronting its imports issues led to this shift.
Notably, the Open Tender System has disadvantages despite being competitive in terms of cost and reliable supply. From time to time, it exposed Uganda to vulnerabilities in the supply chain, making Ugandan OMCs secondary in the case of supply outages. These weaknesses created more difficulties, which led to Uganda getting comparatively expensive petroleum products, which in turn affected retail pump prices.
According to Nankabirwa, “the Ministry of Energy and Mineral Development will retain its overall responsibility for regulating the importation of petroleum products into Uganda with the amendment of the Petroleum Supply Act.” When appropriate, the Ministry and the Office of the Attorney General shall work closely together to create statutory instruments that will operationalize certain parts of the law.
As per the proposed Bill, the licensed Oil Marketing Companies (OMCs) involved in the importation of petroleum products into Uganda will receive their supply from the Uganda National Oil Company (UNOC). Because of this, the OMCs will keep distributing these goods to customers via retail petrol pumps and their current business agreements.
Establishing a Partnership to Ensure Security Provision
The development of a strategic alliance to guarantee supply security is a crucial component of this change. Vitol Bahrain E.C. and UNOC have signed a five-year contract; Vitol will supply the necessary funding through a working capital arrangement secured by its worldwide balance sheet.
This cooperation, together with UNOC, is dedicated to guaranteeing competitive pricing for petroleum products and upholding buffer stockpiles in Tanzania and Uganda that can be utilized in the event of supply shortages. Additionally, the partner has promised to finance the building of 320 million liters of extra capacity at Namwambula, Mpigi, in partnership with UNOC.
Vitol is a strong partner that has a $505 billion turnover in 2022. It is the top independent global trader and brings a strong regional presence along with a dedication to improving UNOC’s capabilities in this area. Through this strategic agreement, UNOC is better equipped to handle the demands of the petroleum product offtake from the Uganda refinery, while also securing the supply chain.
With a shared commitment to ensuring a smooth implementation of this policy change, it is important to highlight that the Ugandan government and the Government of Kenya are still in active communication in light of these profound developments. Both countries understand how crucial economic expansion and regional stability are in this crucial area.
