Home Market Kenya oil facilities face huge losses as Uganda shifts to Dar port

Kenya oil facilities face huge losses as Uganda shifts to Dar port

Uganda, its largest regional market, since October 2023, new data shows

by Vesta Daily
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Kenya oil facilities face huge losses as Uganda shifts to Dar port

Kenya has lost $200 million in exports to Uganda, its largest regional market, since October 2023, according to new data.

Experts worry that it will lose even more in the future as the debate over petroleum product imports heats up, putting critical oil infrastructure at risk of underuse.

Uganda stated last week that it was turning to Tanzania for oil imports after failing to get its national oil marketer, Uganda National Oil Company (Unoc), licensed in Kenya to ease imports through the Mombasa port.

Ugandan Energy Minister Ruth Nankabirwa told reporters in Kampala on Tuesday that Kenya’s ongoing unhappiness with the Unoc arrangement jeopardizes Uganda’s gasoline supply stability.

“You can’t sit there and rely just on one individual. So far, I’ve met Tanzania’s president. “My president sent me as an envoy, and we are in talks,” she stated.
“So, we know that the alternative route could be expensive because of the logistics that are involved but we also know that there is a possibility of a negotiation with the government of Tanzania, to waive some taxes so that their sister country can be able to do business.

According to the Daily Monitor, Ms Nankabirwa stated that Kenya’s President William Ruto had expressed support for Uganda’s action on multiple occasions, “but I don’t know where all this frustration is coming from”.

“The president ordered me to meet with President Ruto four times, and he was quite supportive each time. Then he brought me, my brother Chirchir [Davis], the Minister of Energy, and some [Kenyan] persons to court; what do you do if you are sued? You’re waiting for the ruling. So we’ve been discussing and will continue to communicate, but we now have a time frame because we believe the pump price in Uganda should be lower,” she said.

If this ruling stays, it will jeopardize Kenya’s $385 million investment in the Kipevu Oil Terminal 2 (KOT2) in Mombasa, which opened last year, and the $170 million fuel jetty in Kisumu.

The Kenyan government built the infrastructure, aiming to double the capacity of handling transit petroleum products from the current 35,000 tonnes to Uganda, Rwanda and Burundi.

The KOT2 can handle up to four vessels at a time, compared with the old terminal, which can handle only one

The KOT2 can handle up to four vessels at a time, compared with the old terminal, which can handle only one
The new port was designed to improve the handling of petroleum products to attract more business from other regional countries competing with Dar es Salaam.

The port is projected to reduce the cost of petroleum products by lowering the cost of demurrage, or the additional time required to load and unload goods, which contributes significantly to the region’s high oil prices.

The Kenya Pipeline Company’s 95-metre oil-loading jetty in Kisumu, which was finished in February 2018, would not be operational until January 2023, due to a delay in the construction of a matching facility in Uganda.

It wasn’t until January 3, 2023, that the first shipment of petroleum products landed at the Mahathi jetty via the MV Kabaka Mutebi II, bringing to an end the five-year wait.

Mahathi Infra (Uganda) Ltd had struck a deal with TotalEnergies and 19 other oil-marketing companies for the use of the Kisumu facility and its facility in Uganda in the project that was partly funded by Equity Bank.

But Kampala suspended its contract with Kenya, saying since the introduction of government-to-government (G2G) importation of fuel deal with the Gulf states, it has got a raw deal.

Uganda is Kenya’s leading export market for imported oil products (super petrol, diesel, kerosene, and Jet A-1 aviation fuel). It imports approximately 900 million litres of petroleum products each month through Kenya.

It is now banking on the 60,000 barrel-per-day refinery to process some of its crude locally to boost jobs and gain from technology transfer. Energy Minister Ruth Nankabirwa says they have chosen Dubai business Alpha MBM Investments Llc to build the $4 billion facility.

Uganda has also granted China National Offshore Oil Corporation permission to produce liquefied petroleum gas at a plant to be built in the Kingfisher development region where it operates.

Kingfisher is one of Uganda’s two commercial oil development projects. The second, Tilenga, is run by TotalEnergies.

Vesta Daily
Author: Vesta Daily

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