Ruth Nankabirwa, the Minister of Energy and Mineral Development, has stated that a contract recently signed by Uganda National Oil Company (UNOC) with Vitol Bahrain E.C to source and deliver petroleum products in the nation will be evaluated every six months.
“This agreement will be reviewed every six months to see where we are and if we are still competitive?” Second, the minister has been given authority to appoint anyone else to supply in the unlikely event that UNOC fails, and all of this must be done in a timely manner so that we do not run dry because we are dealing with a very sensitive commodity,” she told the media last Thursday (November 2).
The minister made the statements during a news briefing at the Uganda Media Centre in Kampala on the upcoming Energy and Minerals Week 2023, which will be held from November 13 to November 18.
She stated that this is one of the precautions they have in place to prevent the contract from expiring in January of next year.
“The security of petroleum product supply is critical.” Vitol informed UNOC that they should develop capacity since they will be able to supply them with the goods they sell and then pay them back. That was the finest negotiated arrangement, according to Nankabirwa.
She mentioned how many precautions there are. “Another agreement condition states that prices must stay competitive. So Vitol cannot simply wake up and raise the price. “Those are safeguards,” she explained.
Nankabirwa claimed that a few international oil corporations approached her office, asking the contract or at least a piece of it.
“Three people came to my office wanting this business, but they didn’t get it.” ‘No, Madam!’ they replied. You’re not going to be able to accomplish it. “At the very least, let us be there; you can’t give it (the contract) to just one person,” she reported.
“But I said, ‘You will not give me money for you.'” You’re going to seek for a sovereign guarantee and you don’t have a refinery, but these folks (of Vitol) have a refinery and, according to Google, Vitol made $505 billion (Sh1,902 trillion) last year,” the minister told the reporters.
She said that local oil marketing firms (OMCs) would not be disenfranchised.
“UNOC is not going to be a distributor; it will just bring the product and then the distributors will get it and we expect competitive prices,” she went on to say.
When New Vision later inquired if they might cancel Vitol’s contract if its performance fell short of their expectations as government, Nankabirwa instead advised us not to jump to conclusions.
“That depends. The evaluation serves as a protection, and you may not terminate the contract but should exercise care or listen to the partner. So, let us not rush into a cancelation, but be assured that we will be evaluating,” she added.
What Vitol is going to do
Irene Batebe, the ministry’s permanent secretary, told the New Vision late last month that Vitol and UNOC negotiated and signed a five-year supply partnership arrangement on August 15, 2023.
She stated that Vitol is funding the firm by providing a working capital facility backed by its global balance sheet and collaborating with UNOC to assure competitive petroleum product pricing.
“In addition, the partnership has ensured that buffer stocks will be available in Uganda and Tanzania in case of shortages in the country.” “The partner has also committed to finance the construction of an additional capacity of 320 million litres in collaboration with UNOC at Namwambula, Mpigi,” she added.
Batebe further stated that Vitol has a significant regional footprint and has committed to increasing UNOC’s capability in the oil industry, allowing it to offtake petroleum products from the Uganda refinery.
“This new policy is intended to improve security of supply for the country and contribute to the competitiveness of pump prices by eliminating the unwarranted transactions in the supply chains,” the minister said.
She also stated that it will eventually provide a financial advantage to UNOC and reduce its dependency on the national purse to fund its oil and gas operations.
The permanent secretary further remarked that the supply structure established by UNOC with Vitol Bahrain will enable it (UNOC) to execute on the three major value propositions they committed to. UNOC is a limited liability company controlled entirely by the Ugandan government.
