The Uganda National Oil Company (Unoc) has embarked on selling petroleum products to oil marketing companies in Tanzania and Uganda, a precursor to its anticipated direct import deal with Vitol Bahrain. This move marks a strategic pivot from Uganda’s historical reliance on Kenyan oil marketing companies for its fuel supply.

Unoc is currently offering these products in small quantities to subsidiaries in the two countries, a step seen as market testing ahead of the full-scale implementation of its agreement with Vitol Bahrain. The forthcoming five-year contract with Vitol Bahrain is intended to end Uganda’s long-standing dependence on Kenyan suppliers, a relationship that has recently been strained by Kenya’s credit-based fuel import deal with Gulf oil majors, which has been cited by Uganda as a factor in high fuel prices.

Historically, Unoc has been a supplier primarily to state-owned entities within Uganda, but it is now poised to broaden its customer base to include private oil marketing companies.

The partnership with Vitol Bahrain, a major global oil player with a stake in the Fujairah Refinery in the UAE, is expected to significantly alter the regional fuel supply landscape. It could particularly affect the revenues of the Kenya Pipeline Company (KPC), which handles the lion’s share of Uganda’s petroleum imports.

Unoc’s initial plans to commence imports under the new deal were thwarted by a licensing complication in Kenya. The Energy and Petroleum Regulatory Authority (Epra) withheld the necessary license, citing Unoc’s non-compliance with regulatory requirements, including the absence of a licensed petroleum depot and a minimum of five retail stations in Kenya.

This development underscores the shifting dynamics within East Africa’s energy sector and the potential ramifications of new trade agreements on the economic ties within the region.