The Uganda National Oil Company (Unoc) has initiated the sale of petroleum products to oil marketing companies in Tanzania and Uganda, marking a strategic move as it prepares for a direct import agreement with Vitol Bahrain. This development signifies a shift from Uganda’s traditional reliance on Kenyan oil marketing companies for fuel supplies.

Unoc’s approach involves distributing these products in small quantities to subsidiaries within the two countries, serving as a market test before the full-scale implementation of the supply deal with Vitol Bahrain. The impending five-year contract with Vitol Bahrain aims to end the decades-long dependence on Kenyan suppliers, a relationship that has been complicated by Kenya’s credit-based fuel import deal with Gulf oil majors, which Uganda claims has led to increased fuel prices.

Traditionally, Unoc has supplied fuel primarily to state-owned entities in Uganda, but it is now set to expand its sales to include private oil marketing companies.

The deal with Vitol Bahrain, a significant player in the global oil market with a stake in the Fujairah Refinery in the UAE, is expected to have considerable implications for the regional fuel supply chain. It could notably impact the revenues of the Kenya Pipeline Company (KPC), which currently handles the majority of Uganda’s petroleum imports.

Unoc’s initial plans to start importing under the new deal encountered a delay due to a licensing issue with Kenya. The Energy and Petroleum Regulatory Authority (Epra) declined to issue the necessary license for Unoc to access KPC’s storage and transport network, citing Unoc’s non-compliance with legal requirements, such as owning a licensed petroleum depot and operating at least five retail stations in Kenya.

This situation highlights the evolving dynamics within East Africa’s energy sector and the potential impact of new trade agreements on regional economic relationships.