Fuel tankers
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Why Uganda National Oil Company failed to gain Kenya entry

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Fuel tankers refill at the Kenya Pipeline Company's Kisumu oil depot in the past.

Photo credit: File | Nation Media Group

A court order and delays by the Kenyan government to waive licensing requirements denied Uganda National Oil Company (Unoc) a permit to operate locally, prompting Kampala to escalate the matter to the regional court. 

Documents seen by the Business Daily show that the High Court in November last year stopped Kenya’s energy regulator from proceeding with a review of Unoc’s licence application, a ruling that was twice extended to December and later to January 22.

The Kenyan Cabinet also delayed in deciding whether to exempt Unoc from three key requirements, despite persistent lobbying by the Ugandan Ministry of Energy and Mineral Development.

Uganda has taken Kenya to the East African Court of Justice in a bid to compel Nairobi to issue the licence that Unoc needs in order to use Kenya Pipeline Company’s (KPC) facilities to handle Kampala-bound fuel.

“On October 11, 2023 the ministry received a special request through the minister for Energy and Mineral Development of Uganda to consider and allow waiver of the following requirement for a petroleum importation licence for an application by the Uganda National Oil Company,” Energy Cabinet Secretary (CS) Davies Chirchir says in letter dated October 31, 2023.

The letter to the Director-General of the Energy and Petroleum Regulatory Authority (Epra) Daniel Kiptoo shows that the requirements were proof of owning a licensed petroleum depot and five retail stations locally.

Others were proof of annual sales volumes of 6.6 million litres of super, diesel and kerosene or jet-fuel and annual turnover of $10 million (Sh1.56 billion at current exchange rates) for the last three years for applicants with operations outside Kenya.

Epra had on September 30, 2023 informed Unoc that the licence application had been rejected due to failure to comply with the requirements.

CS Chirchir’s letter came two weeks before the High Court in Machakos directed Epra to suspend review of Unoc’s licence application pending hearing and determination of a case filed over the matter.

Uganda’s case at the regional court is based on grounds that Kenya’s decision to deny Unoc the licence contravenes the East African Treaty and the United Nations Convention on the Law of Sea.

Kampala holds that Nairobi has breached Article 93 (c) and (d) of the East African (EAC) Treaty that provide that for maritime transport and ports, partner states shall make rational use of existing port installations.

The EAC Treaty also compels coastal partner states should corporate with the landlocked partner states and grant them easy access to port facilities and opportunities in provision of port and maritime services
Uganda further says that it has rights to access Kenya’s maritime facilities and transit routes under the United Nations Convention on the Law of the Sea.

Uganda imports an average of 2.5 billion litres of petroleum annually valued at $2 billion (Sh302.34 billion), with KPC handling at least 90 percent of the cargoes.

Kenya and Uganda fell out in November last year after Kampala opted to start directly buying fuel in the global market, in a bid to end reliance on Kenyan middlemen, whom President Yoweri Museveni accused of inflating pump prices by up to 59 percent.

Uganda also held talks with Tanzania amid the impasse with Kenya, as Unoc raced against time to ensure that it delivers the first fuel cargoes without hitches, this month.

The Kampala-Nairobi fall-out over the fuel import facilities looks set to test their diplomatic ties, with experts now questioning communication between presidents of the two neighbours.

“Will this be the new trend now? Do the presidents talk to each other? What are the ramifications on the wider East African Community integration process?” Posed an expert who sought anonymity.

Uganda’s deal mirrors a similar arrangement that Kenya has with Saudi Aramco, Abu Dhabi National Oil Corporation and Emirates National Oil Company to import fuel on a 180-day credit period.

Kenya says that its deal with the Gulf oil majors cut huge monthly demands for dollars and slowed the weakening of the shilling against the dollar, besides reviving the interbank market.