TIGHTEN YOUR BELTS: Higher Prices Ahead as Museveni Government Gives Dutch Company Deal to Control Uganda’s Fuel Supply

On Sunday, November 05, Ugandan President Gen Yoweri waxed lyrical about his new plan to streamline the fuel supply sector by stopping middlemen from cheating Ugandans. But what Museveni did not tell Ugandans was that he plans to bring on board Dutch company Vitol to work with Uganda National Oil Company (UNOC) – a move that could see fuel prices increase.

According to Museveni, Uganda imports petroleum products of the magnitude of 2.5 billion litres per annum valued at about US$ 2bn.

The president claimed that he did not know that officials at the Ministry of Energy had okayed the buying of this huge quantity of petroleum products from middlemen in Kenya. “A whole country buying from middlemen in Kenya or anywhere else!” wondered Museveni. “Amazing but true.”

He compared the prices by middlemen and bulk suppliers or refiners. For diesel, Museveni noted that the middlemen’s price was $118 per metric tonne against bulk suppliers’ $83; for petrol, the middlemen sold at $97.5 while refiners sold at $61.5; for kerosene, the middlemen’s price was $114 while the bulk suppliers’ was $79.

“These are prices when the products have arrived at the East African Ports. You can see the huge loss Uganda has been incurring on account of our wonderful People,” he explained.

So, what’s Museveni’s plan? Bypassing the Kenyan middlemen to import from abroad – and bring on a foreign investor.

“Why not buy from the Refineries abroad and transport through Kenya and Tanzania, cutting out the cost created by middlemen? Those involved were not bothered by these issues,” he noted.

Bypassing Kenya means Uganda will have to use the Tanzanian route.

As she tabled the Petroleum Supply (Amendment) Bill 2023 before Uganda’s Parliament for the first reading, Energy Minister Ruth Nankabirwa explained that the piece of legislation would make UNOC the sole supplier for all licensed Oil Marketing Companies (OMC).

As Nankabirwa explained, the Museveni government hopes to use the law for purposes of petroleum products supply security, boosting stockholding levels and shield Ugandans from exorbitant prices.

On the surface, it looks like UNOC will be running the show. But, far from it. First Vitol will have the sole responsibility of sourcing the petroleum products. It will then supply these to UNOC at a price that allows it to make a profit – the Dutch oil trader is in this to make money, do not be fooled!

Nankabirwa praised Vitol as a “strong partner and number one independent Global trader with a strong regional presence that has also committed to building the capacity of UNOC in this business which will also enable UNOC to build the required capacity to offtake the petroleum products from the Uganda refinery.” Indeed, Vitol recorded a $505bn turnover in 2022 – and is looking for more billions in Uganda.

In the contract that will last five years, Vitol Bahrain E.C. “will be financing the business by providing a working capital facility backed by its global balance sheet and working with UNOC to ensure competitive pricing of petroleum products,” according to Nankabirwa.

But the minister was silent when it came to the integrity of the oil trader that has previously seen the US fine Vitol over bribery in countries like Brazil and Ecuador.

There are already concerns that Vitol did not get the Ugandan deal in a transparent manner, with allegations that lobbyists could have used their influence to push through the deal.

The Vitol-UNOC deal may not resolve Ugandan’s fuel crisis because by bypassing Kenya and choosing the rarely used route of Tanzania, the extra costs of transport will be factored in and met by the final consumer. While the Tanzanian route may take up to four days, the Kenyan route takes about one day.  This means that even if Vitol had reserves for Uganda in Tanzania, citizens would still suffer high prices due to the transport costs. But Vitol has no reserve in Tanzania. Even Vitol’s promise to build some sort of storage facility for 320 million litres at Namwambula in Mpigi may not help since this is not meant to be a reserve.

Meanwhile, as Vitol brings in its capital to earn profits in oil trade in the impoverished East African nation, Ugandans have more to worry about as capitalists descend on Kampala. A few days ago, Museveni’s government officially allowed a controversial Russian company to milk billions from Ugandan car and bodaboda owners in a digital number plates deal. (See Details Here).