Oil companies reluctant to cease total fuel importing monopoly to UNOC

When Energy and Mineral Development Minister, Ruth Nankabirwa tabled the Petroleum Supply (Amendment) Bill, 2023 early this month, signs were that private national and multinational Oil Marketing Companies (OMCs) would only settle for business inland.

This is because, in the amendments, the Government wants to hand the monopoly of importing petroleum products to Uganda National Oil Company (UNOC) a public body that is tasked with handling the commercial interests for Uganda in the petroleum sector.

Currently, multinational OMCs including Oilex, Total and Stabex have been importing fuel and gas to Uganda mainly through Kenya. However, with different companies importing and distributing fuel, motorists have been treated to different pump prices at different fuel stations across the country.

The government therefore, wants UNOC to monopolise the importation of petroleum products so that the pump price for fuel stablises. Currently, each company has a different pump price ranging from Shs5000 to Shs5200.

Parliament’s Committee on Environment and Natural Resources is scrutinizing the Bill and has been holding public hearings in order to get the views of the stakeholders in the sector.

While appearing before the Committee, the OMCs under their umbrella body, Sustainable Energies and Petroleum Association (SEPA) told MPs that the amendment of the law should take into consideration a provision to allow them to import and supply special petroleum products.

SEPA officials stated that they do not oppose the government proposal to hand UNOC the monopoly to import petroleum products but pointed out that there could be instances where UNOC is incapacitated to import higher grade petrol products or in the required quantities.

“Oil marketing companies had agreed to bring higher grade petrol into the country, which could be at 95 to 98 octane rate for purposes of those who drive cars which require high rating petrol. We are asking that the bill allows OMCs to import such products when UNOC is unable,” said Anthony Ogalo, General Manager, SEPA.

He said that the bill simply prescribes products that will be imported by UNOC but warned that the law should consider the dynamics of the supply chain, such as the changing grading of petroleum products and their demand, and the environmental aspects which UNOC may not necessarily be able to meet when left as a monopoly.

“If the issue of the capacity of UNOC to import all specialized products is not addressed, there might be a challenge when a marketing company wants to bring such products it will not be allowed since UNOC will only be the licensed supplier,” Ogalo said.

The bill provides that UNOC will import and supply automotive gasoline or super petrol, automotive gasoline or diesel, Jet A-1 and dual-purpose kerosene.

SEPA further proposed that beyond the specialized products, the bill should allow OMCs to import other oil products excluded from the list to be supplied by government.

The committee questioned SEPA on why they easily conceded to the proposed UNOC monopoly that automatically kicks them out of business.

“UNOC is a trader, you are also traders. UNOC is one but you are many, yet you are saying we support UNOC as the sole supplier, what are your interests?” asked Eddie Kwizera, MP Bukimbiri County.

Vitol Bahrain

Also, the involvement of Dutch multinational, Vitol Bahrain in the picking of petroleum products from the East African coast through Kenya and handing it over to UNOC at the border of Uganda, has been of concern in the processing of the Bill.

The Committee learnt that UNOC has already signed an agreement with Vitol before even the amendments that legalise its monopoly on importation of fuel has been passed by Parliament.

According to Government, Vitol Bahrain, will finance supply of the petroleum products up to the delivery points in Kenya and Tanzania and allow UNOC to pay for the imports after receiving money from the Oil Marketing Companies.

Minister Nankabirwa said that Vitol Bahrain with experience of more than 55 years in the oil and gas sector will bring along this experience and expertise to enhance UNOC import operations.

Mbale City northern Division MP Seth Wambede in one of the Committee meetings asked Attorney General, Kiwanuka Kiryowa to explain if such a move wouldn’t go violate an earlier Constitutional Court ruling against monopolies in Uganda.

Kiwanuka submitted that the earlier case was against creating monopoly amongst private companies, saying such a case can’t apply to Government companies.

Aisha Kabanda, the Butambala District woman MP made a case against Vitol saying that it is only running to Uganda after failing to secure business with the Kenyan government.

She said that it is not fair to make a law that closes business to other companies in favour of one company in the name of securing importation monopoly by UNOC.

“Vitol is using UNOC because Kenyan Government called tenders and for three times, Vitol has failed and is now using Uganda to import fuel into Kenya but for Uganda. If we wanted to create an advantage for Ugandans, why do we make a law that advantages Vitol. That is the discrimination we are talking about, why not make a law that opens up other companies to import for Uganda?” she asked.

Kabanda added that since UNOC is being made the sole importer of fuel into Uganda, it could still enter an agreement with any other firm to deliver the petroleum products to the coast of East Africa.

However, Kiryowa informed the Committee that UNOC being a Ugandan public company, its monopoly by the force of the law will put Ugandans to the advantage in doing business.

“UNOC is 100% owned by people of Uganda so there is no law that can stop people from Uganda from conducting business in their country even as a monopoly. As you may realize, we have Uganda Airlines, Uganda Railways Corporation, now we have UNOC. By the way UNOC is the only company that can deal with the oil that will be produced in Uganda that is an inherent right of the people of Uganda” Kiryowa argued.

Responding to concerns on why UNOC entered into an agreement with Vitol before the Bill was considered, the Attorney General said that the agreement would only take effect upon the passing of the law by Parliament.

While defending the proposals in the Bill, Nankabirwa warned that any failure by Uganda to end reliance on Kenya by January 2024, would condemn the country to another year long contract with Kenya.

“If we miss January, Kenya will tie us in a contract that will take us like one year. And then we move with that Government-to-Government agreement like they did without our knowledge. We were tied in and when we were trying to plead, they said we have a contract that runs for one month. So, I consulted with the President and he said let us not cut away, let us wait when their contract ends in January and ours begins in January 2024,” said Nankabirwa.