Kisumu oil jetty: Why Sh1.7bn project could be a white elephant

Ondari Ogega | Nation Media Group

The Sh1.7 billion Kisumu Oil Jetty on May 5, 2023.

Photo credit: Ondari Ogega | Nation Media Group

In the last term of the Jubilee government, President Uhuru Kenyatta embarked on major development projects in Kisumu County, which included refurbishment of the port and oil Jetty with an eye on business with Uganda.

The two projects could be rendered white elephants unless Kenya resolves the on-and-off trade tiffs with Uganda with the latest being on a controversial oil deal that sidesteps Kenya.

The oil jetty whose construction cost Sh1.7 billion offers a more convenient fuel transport route given that it has cut the time taken to ferry fuel compared to trucking.

It had done well helping Kenya ward off competition from Tanzania as the main fuel import entry point to Uganda and neighbouring nations while the Kisumu Port which was also refurbished to the tune of Sh3 billion had positioned itself as a major gateway into the East African Region.

On Wednesday, the Ugandan Parliament adopted the Petroleum Supplies Amendment Bill 2023 that gives Uganda National Oil Company powers to import all petroleum products supplied by Vitol Bahrain E. C Group ending reliance on the Kenya Government.

This effectively ends the open tender system used to bring in petroleum products. The Ugandan government believes the move will stabilise fuel stocks, create security of supply, and solve price see-saws.

However, the decision does not bode well for Kenya. It is estimated that the country could lose up to $100 million it has been earning from handling Uganda’s petroleum and related products. 

If this sees the light of day, the Kisumu Port could go back to its dormant self while the oil Jetty could as well be deemed irrelevant.

MV Uhuru I and II usually make numerous trips transporting bulk oil products to Jinja but this is likely to be affected by the current turn of events that has seen President Yoweri Museveni’s administration exploring docking facilities in other East African Community member State of Tanzania.

The new dispute over oil is one of a series of trade tiffs that have seen Uganda look south to Tanzania on business logistics and this is not going down well with traders depending on the port and jetty for business.

Mr Israel Agina, Kenya National Chamber of Commerce and Industry (KNCCI) admits that Uganda was perfectly in order by having its own import system after it entered into another deal.

He, however, feels if Kenya is to continue doing business with the Ugandans, they will have to engage their neighbour in good faith.

“As it stands, the Ugandan Parliament did not say how the oil should be transported. This is why Kenya must know how to engage and talk to their Ugandan neighbours. So long as Kenya treats them as business partners, they will have no reason to go away,” said Mr Agina.

He called on the Kenyan Government to review the cost of transporting oil through its pipeline.

Mr Ted Odero, a maritime transport consultant who has been operating at the Kisumu Port, the move by Uganda will definitely affect Kenya in one way or the other.

Mr Odero said oil marketers will now be forced to register with UNOC which has been given exclusive rights. He, however, hopes not all will opt for Tanzania.

“This move will definitely affect the revenue we are getting as a country. We are hoping oil marketers will still transport their products via Kisumu to Jinja and not exclusively through Tanzania,” said Mr Odero.

In December last year, Uganda shipped its maiden fuel cargo from the Port of Kisumu bringing a spark to the Lake Victoria Port.

The 4.5 million litres of fuel ferried aboard MT Kabaka Mutebi II marked the revival of the water transport corridor between the two neighbours and boosted Kenya’s efforts to create jobs in the Western region.

Uganda’s decision to start ferrying fuel from the Port of Kisumu was viewed as key to Kenya’s efforts to beat Tanzania in the race to be the major entry point for fuel products into East Africa. But the latest about–turn appears to likely affect this relationship that had already developed.

Last week, MT Kabaka Mutebi II left for Jinja after picking up fuel from the jetty. It remains unclear whether the voyages it has been making throughout the year will cease in the wake of the current fall-out between the two neighbouring countries.

However, Rebecca Miano, Kenya’s new Trade Cabinet Secretary had indicated that there is no formal termination of the agreement and that Kenya officials were expected to meet their Ugandan counterparts over the matter.

Should her efforts to reconcile with the neighbours fail, the oil deal could see the two EAC countries drift apart with the biggest beneficiary being Tanzania which according to experts has been steadily clawing at Kenya’s incomes.