Minister Nankabirwa defends Uganda’s fuel deal

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While economic experts argue against that the termination of the fuel with Kenya, the Energy Minister Ruth Nankabirwa Sentamu has  that the amendments in the Petroleum Supply Act of 2003 are the long awaited to answer Uganda’s fuel conundrum.

The surge in fuel prices in Uganda has for long been pain to many Ugandans.

The Ministry of Energy and Mineral Development then moved to find a lasting solution to this problem through amending the Petroleum Supply act of 2003 to give monopoly to the Uganda National Oil company (UNOC) to be the supplier of fuel to the oil marketing companies.

The proposal has already been tabled in Parliament.

While appearing on NBS Morning Breeze Principal spokesperson of the Ministry, Solomon Muyita explained the technical validations of the proposal.

“One, the proposal will guarantee security of supply, two will ensure that the consumer receives the product at the lowest possible price, and three, the proposal will economically empower UNOC to make money such that by the time our commercial oil production in 2025 starts, the company has enough money on its account,” Muyita said.

Speaking on Thursday while announcing the energy and minerals week that November,13 and 18, Minister Nankabirwa emphasized that Kenya has pushed Uganda into a hard place making the move inevitable.

“You all remember what happened on the 7th of April when there was a shortage of supply and the Minister woke announced preference of supply to Kenyan OMCs and that when Fuel comes it first goes to Kenyan local companies that would then sell to Ugandan Oil Marketing Companies, they would then deliver the product here all these layers of supply would see an increase in the cost of fuel. Then you wake up one day and they close the open tender system and Uganda is just there to say yes sir. We have now chosen to say no, “ Nankabirwa said.

 Economist Dr. Fred Muhumuza however says that government would have shot t itself in the foot if takes on such a move for many reasons.

“What sort of signals are you sending to the investors out there? Uganda is a liberal economy and should not back track on that. Petroleum or fuel is the heart if the economy and putting all this in the hands of a monopoly would put the country at risk. It also comes at time when Uganda is getting bad PR on account of human rights, Uganda out of AGOA business and travel advisories being issued, embassies closing, then government wakes up to push OMCs out of business means that Uganda risks losing Foreign Direct Investments.”

 Licensed oil marketing companies have been tightlipped on this matter and according to the energy minister, some of these actually wanted to take the lead rather than have UNOC be the only player.

 Concerns about the process of arriving Vitol Bahrain as the lead supplier to UNOC beginning Jan 2024, its capacity to supply, and weather it has zero net implications on the country’s reserves are high.

Deep throat sources at the ministry say that Vitol Bahrain is one of the companies that may advance some financing to oil refinery and as such, it does not come as a surprise that it was considered for this one other than another company, the Kenyan oppression notwithstanding.

In response however, Minister Nankabirwa said,  “When you google Vitol you will see, the company has a refinery, a total net worth of $500 billion. The company is not going to put pressure on to UNOC and we shall not ask for any coin from the country’s treasury to push this through. So, if any of you fight this proposal, just know that you are fighting your own company a Ugandan company at that.”

 Even when government says that its intention is to reduce pump prices, economists argue that without a regulatory body just like EPRA in Kenya will keep Uganda far from attaining stability of fuel prices because determinants of fuel prices are largely exogenous.

Uganda uses over seven million liters of petroleum each day, from its 1,047 licensed fuel stations.

 

 

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