Bill granting UNOC monopoly over oil supply now awaits Museveni’s signature

KAMPALA, November 15, 2023 – Parliament has passed the Petroleum Supply (Amendment), Bill 2023, giving the Uganda National Oil Company [ UNOC ] the monopoly to import and supply all petroleum products destined for the Ugandan Market.

The Petroleum Supply (Amendment), Bill 2023, which President Yoweri Museveni is expected to assent to, aims to eliminate Kenyan middlemen who have been supplying petroleum products to the Ugandan market, with government accusing them of being responsible for high fuel prices.

UNOC is a government owned company established to handle government’s commercial interests in the petroleum sector. This is after government discovered oil reserved in western Uganda, which are now being developed to deliver oil by 2025.

“Uganda imports 90 percent of its petroleum products through Kenya and 10 percent through Tanzania. The system currently imposes three layers of middlemen from overseas refinery to the Ugandan oil marketing companies. Each of the middlemen companies infuses a profit margin which is ultimately fed into the final pump price,” said Emmanuel Otaala, the chairperson of the Committee on Environment and Natural Resources, which scrutinised the Bill.

Otaala was presenting the committee report on the bill during the plenary sitting on Tuesday.

The committee observed that Uganda’s current inability to purchase oil directly from the refineries, leads to an extra markup on Uganda’s fuel from Kenyan companies and insecurity in supply of petroleum products which contributes to high and unpredictable pump price.

If assented to, the Bill will build UNOC’s capital base as it is will be able to negotiate fair prices for Uganda, an opportunity not enjoyed now.

MPs said the Bill is timely in eliminating dependence on Kenyan brokers who according to the committee findings, have adversely disadvantaged Ugandans in access to petroleum products timely and in the required quantities.

“Giving UNOC a monopoly is like strengthening our own child, it is for our own good that we get rid of middlemen who take the big portion of the profit,” said Stephen Baka, the Bukooli County North MP.

Alioni Yorke , the Aringa South County MP observed that UNOC is fully owned by government and vouched for the removal of Kenyan competitors who, he said, made Ugandans victims of unstable oil prices.

“We are tired of having our prices controlled by brokers from the neighboring countries. Many of us, yes even MPs have been the victims of oil prices. This Bill is meant to protect our own interests in the sector,” he said.

However, a section of legislators was however opposed to the Bill saying creating monopolies has not benefited the economy.

“Past experiences of monopolies including UMEME, the Enrico agreement, the Iron ore agreement, Dura cement agreement have cost the country money and set a bad precedence for monopolies in Uganda,” said Busiki County MP Paul Akamba who presented a minority report.

He argued that creating a monopoly is un constitutional as it prohibits fair competition.

The opposing legislators criticised the move by UNOC in signing an agreement with an international oil company known as Vitol, that will act on its behalf to purchase oil from international refineries.

This according to the committee findings is because UNOC currently lacks the financial capacity to directly purchase petroleum products from oil refineries and shall thus be buying from Vitol.

As a result, Vitol shall finance the supply of the petroleum products up to delivery points in Kenya on a non-immediate cash payment basis, to enable UNOC pay after supplying the oil marketing companies within Uganda.

Budadiri County West MP, Nathan Nandala-Mafabi was afraid that this is likely to enrich Vitol at the expense of Uganda.

“It would have been better that we give UNOC money to trade directly. When we bring in Vitol the shareholder of Vivo energy that trades as Shell, I can tell you we might be helping them to make more money instead of benefiting Ugandans,” Nandala-Mafabi said.

He said Vitol will now source for money all over the world to supply Uganda with oil “but there will be interest, so the moment we approve a monopoly fuel prices will be high.”

Days ago, some oil importers asked parliament to allow them to import what they called critical oil products that may not be imported by UNOC.

The Bill now awaits the Presidential assent. Museveni is in support of the new arrangement to be used in importing Uganda’s petroleum products, even some politicians and businessmen in Kenya are opposing the move that still needs to rely on Kenya’s oil infrastructure.

https://thecooperator.news/uganda-is-losing-so-much-by-buying-petroleum-through-middlemen-in-kenya/

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