Uganda cuts oil deal with Kenya, cites exorbitant prices by middlemen

Currently, Uganda imports more than 90% of its petroleum products through the Port of Mombasa in Kenya and the rest through the Dar es Salaam port in Tanzania. 

The importation is done independently by the licensed Ugandan Oil Marketing Companies (OMCs) however through the importation structures in Kenya and Tanzania.

President Yoweri Museveni said on Sunday that Uganda, which imports USD 2 billion in petroleum products each year, has been sourcing the same products from middlemen in Kenya at exorbitant prices, exacerbating the country's fuel crisis.

"Without my knowledge, our wonderful People, were buying this huge quantity of petroleum products from middlemen in Kenya," Museveni wrote on X. 

"A whole country buying from middlemen in Kenya or anywhere else!! Amazing but true." 

According to Uganda's leader, a barrel of diesel from middlemen costs USD 118, while the same barrel from bulk sellers or refiners costs USD 83.

He claimed that profit-seeking middlemen inflated petrol and kerosene prices even further, working "with internal parasites who have been cheating their country."

According to Museveni, it is more cost-effective for Uganda to purchase from refineries abroad and transport the product to Uganda via Kenya and Tanzania.

"Why not buy from the refineries abroad and transport through Kenya and Tanzania, cutting out the cost created by middlemen?" He posed. 

Museveni claims that Uganda has already contracted bulk and refinery suppliers in order to obtain lower prices for the products.

At the same time, he said he has discussed with President William Ruto, and his Tanzanian counterpart, Samia Suluhu on how bulk petroleum will move through Kenya and Tanzania, destined for Uganda. 

 "I have discussed this with H.E Ruto, the President of Kenya and our delegation is now in Dar-es-Salaam, discussing with Her Excellency Samia Suluhu. " he added. 

According to Museveni, Uganda's refinery will be operational in the "next few years," with the goal of supplying her landlocked neighbours as well as inland East Africa with "competitive petroleum products, free of distributions caused by middlemen."

"The whole of Uganda, North- Western Tanzania, Rwanda, Burundi, Western Kenya, South Sudan and Eastern DRC, will benefit," he added. 

The latest comes just days after Uganda's Ministry of Energy and Mineral proposed a bill seeking  to cut reliance on Kenya for importation of its petroleum products.

In a statement from the ministry on Tuesday, the land-locked nation seeks to cease its reliance on Kenya to access petroleum products, citing exposure to "occasional supply vulnerabilities" and an increase in pump prices.

"These vulnerabilities paused additional challenges, resulting in Uganda receiving relatively costly products and ultimately impacting the retail pump prices," read part of the statement adding that the move has been prompted by Kenya's government-to-government importation deal with UAE and Saudi Arabia.

If the bill is passed into law, the ministry adds, Uganda shall maintain its overall responsibility of regulating the importation of petroleum products into Uganda by granting the Uganda National Oil Company Limited (UNOC) the mandate to source and supply petroleum products for their markets.