NAIROBI, Kenya
Kenyan oil dealers are in a crisis mode after Uganda stuck to its guns and started talks with Tanzania to import its fuel through the Port of Tanga instead of the Port of Mombasa following a spat with Nairobi.
Uganda had initially announced
that it was in talks with Tanzania to use the Port of Dar es Salaam to import
its fuel after Kenya refused to give it concessions to use its pipeline.
But the road distance between
Dar es Salaam and Kampala is 1,715.6km, which is 49.5 percent longer that the
distance of 1,147.6km between Mombasa and Kampala.
This shorter distance means
that Uganda saves up to $35 per cubic meter for using Mombasa instead of
Dar. The Business Daily understands Kenyan State officials –
as well as oil executives in both Kenya and Uganda – had earlier believed that
Uganda was bluffing about shifting its import route to Tanzania. This is
because, besides being cheaper, the Mombasa port is faster and more efficient
than the Dar es Salaam port.
But this has changed after it
emerged last week that Uganda and Tanzania are locked in talks that will see
the former import fuel via the Port of Tanga, which is far closer to Kampala.
Tanga is the oldest port in East Africa and is the second largest in Tanzania.
While it's far smaller than the Dar and Mombasa ports, Tanzania has been
boosting its capacity to handle more cargo in recent years.
“The mood in the industry has
been that the Tanzania talk by Uganda was just posturing to push Kenya to give
it concessions. But this has changed completely because Uganda are now serious
and are close to reach an agreement with Tanzania to use the Tanga port,” said
source privy to the matter.
“Tanga is not as far (from
Kampala) as Dar and therefore the price difference with Mombasa will not be as
big. We also understand that Uganda could be given some reliefs by Tanzania to
close the gap,” said the source. Uganda currently buys 90 percent of its fuel
via Kenya and 10 percent through Tanzania.
The Petroleum Outlets
Association of Kenya (Poak), a lobby for independent oil dealers, says that it
would deal a huge blow to local OMCs if Uganda actualises the plan.
“If Uganda indeed moves to the
Tanzania route a lot of local oil companies will really suffer because they
will lose their biggest market,” said Poak chairman Martin Chomba.
About a third of all fuel
imported into Kenya is destined for the transit market, translating to an
average of 200 million litres monthly. Mr Chomba said that a lot of especially
small dealers rely on this transit market and would likely be forced to close
shop.
He further said that Kenya
would lose a key source of foreign exchange. Oil dealers are paid for their
fuel exports in US dollars. Uganda last year said it imports fuel worth $2
billion through Kenya annually.
“The transit market is a key
source of forex for the country and this would really affect dollar inflows,”
said Mr Chomba.
State-owned Kenya Pipeline
Company (KPC) would also emerge as a major loser. This is because without the
nearly a third of transit market, it would lose millions of shillings in depot
tariffs, which are a major source of revenue for KPC. Currently, oil firms
evacuating fuel from KPC’s Nairobi fuel depot pay Sh2,582.72 per cubic-meter.
This will further rise to
Sh2,791.85 per cubic meter in July.
The origin of this latest spat
between Kenya and Uganda comes following the decision by Kampala last year to
designate State-owned Uganda National Oil Company (Unoc) as the importer of all
its fuel for supply to private oil dealers.
Unoc subsequently applied to
Kenya’s Energy and Petroleum Regulatory Authority (Epra) in September 2023 to
be registered as an OMC in Kenya, which would allow it to import and export
fuel like other OMCs and utilize Kenya Pipeline Company’s (KPC) pipeline.
Epra however declined UNOC’s
application because UNOC could not substantiate the requisite annual sales
volumes of 6.6 million liters of either super petrol, Automotive Gasoil
(diesel), and/or Jet A1/kerosene in Kenya.
Uganda has since then sued
Kenya at the East African Court of Justice (EACJ).
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