Kenya yields to Uganda's solo oil import push

UNOC to directly import the country's refined petroleum products.

In Summary

•The two countries signed a tripartite agreement that will see Uganda National Oil Company (UNCO) import the country's products through Mombasa.

•President Museveni and Ruto have also revived plans to extend the oil pipeline and SGR to Kampala. 

Ugandan President Yoweri Museveni and President William Ruto during a meeting at State House, Nairobi on May 16, 2024.
Ugandan President Yoweri Museveni and President William Ruto during a meeting at State House, Nairobi on May 16, 2024.
Image: PCS

Kenya has finally given in to Uganda’s demands to import its own refined petroleum products through the Port of Mombasa, amid revival of plans to extend the pipeline to Kampala.

This follows a meeting between Uganda President Yoweri Museveni and President William Ruto in Nairobi.

The two countries signed a tripartite agreement that will see Uganda National Oil Company (UNCO) import products through Mombasa, before being moved by Kenya Pipeline infrastructure to Eldoret and Kisumu deports for last-mile delivery by road into Uganda.

Kenya’s Petroleum PS Mohamed Liban (for the Energy and Petroleum Ministry), Uganda’s Energy and Mineral Development Minister Okaasai Opolot and UNOC chief executive Proscovia Nabbanja signed the deal.

The tripartite agreement on the importation and transit of refined petroleum products through Kenya now brings to an end a stalemate between the two countries which heightened in January, after Uganda took Kenya to the East African Court of Justice (EACJ) in January, for refusal to allow its state set base in Kenya.

In March, Kenya softened its stand with Energy CS Davis Chirchir then saying Kenya was open to an out-of-court deal, which included licensing of UNOC to import the country’s fuel products.

President Ruto said the tripartite agreement now enables the Uganda National Oil Company Limited to import refined petroleum commodities directly from producer jurisdictions, thus “bringing to an end the challenges faced by the sector In Uganda.”

“We are confident that these instruments will consolidate our strong relationship and anchor it on a transformative trajectory. As leaders, we are committed to implementing all our obligations in order to reap their full benefits,” Ruto said.

The two countries have also revived plans to extend the pipeline network from Eldoret to Malaba (Kenya-Uganda border), with Uganda expected to construct a link line to Kampala.

The project is expected to kick off in December this year according to insiders.

The pipeline will extend to Kigali in Rwanda and possibly Bujumbura (Burundi) in the future, with each country responsible for the development of the infrastructure within its borders.

However, a joint "transaction advisor" will be selected to maintain quality control.

The feasibility study for the Eldoret to Kampala pipeline extension was awarded to an international firm in 1997 with a report submitted in 1999.

This was after a study funded by the European Investment Bank indicated the project was feasible.

Kenya has in recent years lost a sizeable export market for petroleum products to Tanzania, with Uganda being a major battleground for the two countries.

Importing its products through UNOC now leaves the two countries battling for business based on port efficiency, with Kenya having a competitive advantage on its depots-Kisumu and Eldoret, which are strategically situated near the two country’s borders.

Uganda imports an average of 2.5 billion litres of petroleum annually valued at about $2 billion (Sh262 billion), with Kenya Pipeline Company handling at least 90 per cent of the volumes.

Museveni’s three-day state visit also saw the two leaders revisit the plans to extend the Standard Gauge Railway (SGR) from Naivasha to Malaba and further to Kampala and DRC, as “an efficient and sustainable infrastructural artery for the transportation of goods.”

“We have obliged our respective Ministers to take joint urgent measures to mobilise resources for the implementation of this regional shared infrastructure and report on progress by the end of 2024,” Ruto said.

Museveni called for an end to restrictions hindering regional integration and trade.

 “These restrictions are not good for the common market. Integration is to fight the battle of prosperity, if someone efficiently produces something and we support them, they will grow,” Museveni said.

In their commitment to expand bilateral trade, the two leaders have directed their ministers responsible for trade “to meet as soon as possible” and resolve any outstanding trade barriers and other issues affecting trade.

WATCH: The latest videos from the Star