Uganda has failed in its bid to decrease costs of petrol and diesel in Kampala via a deal to straight buy gas from oil and commodities large Vitol Bahrain.
That is after diesel value in Kampala jumped this week to $1.38 per litre from $1.37 whereas that of petrol rose to $1.47 from $1.46, that means that Kampala has overtaken Nairobi as town with the most expensive gas in East Africa.
In Nairobi, a litre of diesel goes for $1.32 and $1.45 for petrol.
President Yoweri Museveni final yr mentioned that the cope with Vitol Bahrain would assist decrease pump costs in Kampala, by reducing off “middlemen in Kenya,” including that they (the middlemen) in Kenya’s government-to-government cope with three Gulf oil majors have been chargeable for inflating gas costs in Uganda.
Uganda Nationwide Oil Firm (Unoc) signed a five-year import cope with Vitol Bahrain and the primary shipments of petrol and diesel landed early this month, and are those presently being offered within the Ugandan gas market.
The cope with Vitol provides Uganda a much bigger say in figuring out gas costs in Kampala, on condition that Unoc has negotiated premiums and freight with Vitol Bahrain. Nonetheless, unexplained excessive pipeline and logistics costs by Unoc are among the elements behind the excessive pump costs.
“Why not purchase from the refineries overseas and transport via Kenya and Tanzania, reducing out the price created by middlemen?” President Museveni mentioned in November final yr when he publicly introduced that Uganda would finish reliance on Kenya’s gas importation buildings.
“We now have now contracted bulk and refinery suppliers capable of give us decrease costs,” he mentioned.
Final month, a litre of diesel and petrol went for $1.37 and $1.46 respectively in Kampala, costs that Uganda had blamed on cartels in Kenya’s Open Tender System (OTS) and now government-backed cope with three Gulf oil majors.
Tanzania has the most cost effective diesel within the East African area, with a litre of petrol and diesel going for $1.20 and $1.16respectively.
In Kigali, a litre of petrol is retailing at $1.263 whereas that of diesel goes for $1.254.
Unexplained larger logistics and pipeline prices have negated the affect of decrease premiums and freight of $81.50 per barrel that Unoc bought from Vitol Bahrain.
Evaluation reveals that Unoc’s logistics for petrol are $36.92 per tonne, in contrast with the $28.03 per tonne that Kenya is paying beneath its government-backed cope with three Gulf oil majors.
Unoc additionally revealed pipeline costs of $57.38 per tonne of petrol, larger than the $45.93 for the same amount of petrol that Kenya Pipeline Firm (KPC) costs.
The gas costs, as tracked by international gas monitoring web site World Petrol Costs.com, deliver to the fore questions on the rationale behind Uganda’s cope with Vitol Bahrain.
It nevertheless stays unclear who’s pocketing the excessive pipeline costs that Unoc revealed within the pricing build-up of petrol.
Uganda’s Minister for Vitality and Mineral Assets Ruth Nankabirwa earlier this month sensationally claimed that Kenya had illegally elevated bonding costs for Unoc’s gas on the facility in Mombasa partly owned by Vitol.
It later emerged that Unoc and Vitol Bahrain had shipped an additional 17,000 metric tonnes of diesel, prompting Kenya to levy further costs, according to the higher-than-expected volumes of gas.
Unoc’s cope with Vitol signifies that Kenya’s affect within the pricing of gas in Kampala is simply via KPC’s costs for transport and storage.
Gasoline in Kenya would have been decrease than the present fee had the federal government not elevated the highway upkeep levy by Ksh7 ($0.054) per litre within the month-to-month pricing cycle introduced on July 14.
Excessive pump costs in Kampala are prone to see a majority of consumers on the border cities cross over to Kenya to get the vital commodity.
Oil entrepreneurs in Kampala have additionally questioned why pump costs are larger regardless of Unoc’s deal in what may improve strain on authorities to defend the association.
Uganda joins Kenya and Tanzania because the three nations within the area which are straight shopping for their gas.
Kenya additionally provides Rwanda, South Sudan, the Democratic Republic of Congo and Burundi.
However, not like Tanzania, Uganda depends on the port of Mombasa and KPC’s storage and transport system to get gas to Kampala.
Uganda doesn’t cap gas costs, not like Kenya. That is moreover fewer taxes charged on gas within the nation, in contrast with Kenya.
Kenya changed the OTS with a G-to-G deal efficient April 2023, in what was aimed toward propping up the then-battered shilling by decreasing the massive month-to-month calls for for {dollars} to pay for gas.
This cope with the Gulf majors has a 180-day credit score interval, with the financing bit being a part of the worth build-up in Kenya’s pump costs.
However, months after Kenya obtained the primary shipments beneath the deal, Uganda initiated a transfer for the same association with Vitol Bahrain.
Kampala accused Nairobi of inking the deal with out consultations and cartels within the import cycle, triggering a diplomatic spat which, at one time, noticed Kenya deny Unoc a licence to function as an area oil marketer so as to entry KPC’s programs.
Uganda went to the East African Court docket of Justice accusing Kenya of going towards the tenets of the EAC Treaty. The case continues to be pending on the regional courtroom.
One other case filed on the Excessive Court docket in Machakos was withdrawn in March paving the way in which for the issuance of a licence to Unoc, and setting the stage for direct buy of gas from Vitol.
