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Uganda has asked the Kenyan government to lower the bond fees of $40m (about sh147b) at an oil storage terminal it uses to ferry petroleum products from Mombasa to Kampala.

This follows the recent commencement of direct importation of refined petroleum products by the Uganda National Oil Company (UNOC) through the Mombasa Port in Kenya.

“As I speak now, I will be going back to Kenya to meet my colleague [Davis] Chirchir (Kenya’s Energy Cabinet Secretary) because of one thing: They have increased the bond fee to the tune of $40m at Vitol terminal where we are going to offload our products and store them,” energy minister Ruth Nankabirwa said on Sunday, July 7.

Nankabirwa said the high bond fees will also increase the fuel pump prices in Uganda, leaving the customers to carry the burden.

“When you increase to $40m it means you are pushing UNOC to also increase and therefore Ugandans are likely not to see a reduced pump price. So, I am still in the negotiations with the Kenyan government to make sure that they don’t force on us this kind of fee, which is a deterrent and not in the East African Community spirit,” she said on the social media platform X.

Nankabirwa assured Ugandans of competitive prices if all factors remained constant. “One factor is already not constant. They have increased the bond fees that must be felt at the pump by the end user. So, let Ugandans wish me success in my negotiations so that the bond fees go down.”

On July 3, 2024, UNOC successfully received its first shipment comprising 78 million litres of petrol and 65,000 tons of diesel at Kipevu Oil Terminal II in Mombasa.

Uganda is currently a net importer of petroleum products, where more than 90% are imported through the Mombasa port in Kenya and the rest through the Dar-es-Salaam port in Tanzania.

The importation was being done independently by the licensed oil marketing companies through the importation structures in Kenya and Tanzania.

Under these structures, the Ugandan oil marketing companies have been accessing their petroleum products import allocations through their affiliated Kenyan companies registered and participating in Kenyan and Tanzanian import structures.

UNOC’s role as the sole importer of petroleum products was solidified by the passing of the Petroleum Supply (Amendment) Act 2023, which granted the company exclusive rights to import and supply all petroleum products into Uganda.

This strategic move is expected to stabilise pump prices in the local market. Previously, oil marketing companies directly sourced petroleum products from Kenya.

UNOC entered into a contract with Vitol Bahrain, a bulk petroleum trader in the Middle East, to supply petroleum products up to the port of Mombasa. From there, UNOC will handle the sale and distribution to oil marketing companies in Uganda.

Monthly shipments are planned to meet Uganda’s fuel demand, which currently stands at seven million litres daily, with an expected annual growth rate of 7%-9%.