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STATEMENT BY THE MINISTER OF ENERGY AND MINERAL DEVELOPMENT TO

PARLIAMENT ON SUPPLY OF PETROLEUM PRODUCTS

07 JULY 2022
lntroduction
'1. Rt. Honourable Speaker, Uganda currently is a net importer of Pelroleum Products and
operates a liberalized markel since 1994 where prices are determined by forces of
demand and supply. The sub-sector is gurded by the Petroleum Supply Act of 2003
and the attendant Regulations.

Purpose
2. Rt. Honourable Speaker, the purpose of thrs Statement is to appnse Parliament on the
products' supply, associated prices and actions by my Ministry.

Background
3. Rt. Honourable Speaker, cunently about 80% of the country's petroleum product
requirements are supplied through lhe Kenya roule using the Open Tender Syslem
(OTS) which Uganda joined in 20'1'1 after a series of engagements with Kenya
Government. The remaining 20% of Uganda's producl requirements, which increased
recently from 5%, are supplied through Tanzania roule which has not been atkactive
due to a long distance and the associated transport costs resulting in high landed prices
per litre.

4 The strategies to keep the country well supplied, therefore, hinge on the effectiveness
of the imporl routes and the in-country slorage facrlities. In this case, l\4ombasa and
Dar es Salaam ports together wilh other terminals in Kenya are being uhlised by Oil
Marketing Companies (OMCs) to import producls inlo Uganda.

Government of Kenya Directives:

5. Rt. Honourable Speaker, you may recall that !n April 2022, Government of Kenya
(GOK) introduced changes in capaclty sharing that require:-
i. The Ol\4Cs in Kenya to declare 60% of all imported product for Kenyan local
market and 40% for transit. ln this regard:
a) Kenya Pipeline Company (KPC) is to ensure that all pumpable stock within
its system adheres to the 60:40 Kenyan local market to transit ratio; and
b) That Kenyan OMCs with higher transit stocks than the prescribed ratio to
immediately localize the excess stock. This directly affected companies
doing business in Uganda with investment in Kenya.

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 Localisalion ot whole parcel of Super Pelrol aboard l\4T Campo Square with 85,
000 metric tons or 133.509 million likes that discharged during the weekend of
30h April 2022 and subsequently dedicated lo lhe Kenyan local market leaving the
Ugandan market with no supply.

t Localisation of the whole parcel of Diesel aboard IVT Elka Athina that discharged
on '12rh May 2022 with 86,000 metric tons or 104.748 million litres was also
dedicated to the Kenyan local market.

6 The above decisions affected security of supply of petroleum products in Uganda

although the country has not reached stock out levels.

Actions so far taken by my Ministry

7. Rt. Honourable Speaker, my Ministry analysed lhe implications of the changes in supply
through Kenya and did the following:-
i. Engaged Kenya's Ministry of Petroleum and Mining in virtual and physical meeting
on 4tn and 17h lt4ay 2022 respectively to discuss the implications of their decision
on supply to Uganda.
ii. Held regular meetings with Ugandan OMCs regarding the country's security of
supply of petroleum products under the circumstances while requiring them to
ensure acceptance prices.
iii. Engaged Tanzania Authorities in a meeting held from 28th to 301h June 2022 to
have Uganda's OMCs actively improve supply through the Central Corridor aimed
at improving security of supply.

Some Outcome of the above actions:

8. Rt. Honourable Speaker, some of the outcomes from the above engagements are:-
i. Adjustment of Kenya's sharing ratio ofKenyan local to transit 60:40 to 55:45
ii. Ugandan OMCs improved their loadings out of Tanzania from 5% to 20% and
this has kept the country well supplred.
iii. Tanzania's road toll reduction from USD 16 to USD 10 per 100 km wjth effect
from 1'r July 2022.

We expect that the positive effects of the above measures will be seen in the coming days

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Transportation of petroleum products over Lake Victoria
iv. Rt. Honourable Speaker, lV/S Mahathi Infra Uganda Limited has been developing a
system to kanspo( fuel over Lake Victoria by barges. Construction of Storage facilities
of 72 million litre capacity is complele. Assembling of the first barge with capacity of 4.5
million likes has also been completed and is ready to kansport the fuel. Other than
tarmacking of the 4km Kawuku (off Kampala - Entebbe roadt - Bwerenga road to the
Storage Facilities, the key challenge to operationalise this prolect is finalisation ol the
Oil Spill and Shipboard Pollution Emergency Plans which are lo be discussed at a
stakeholders' workshop tomorrow 8th July 2022. We hope that this impediment will be
resolved by 151\ July 2022 thereby butkessing the country's preparedness in case of
any supply disruptions during Kenya's electioneering perrod given that the barge can
make two round trips per week.

Current pump prices in the country

v. Rt. Honourable Speaker;
i. As we continue to focus on supply to allow the interplay of markel forces of demand
and supply on the pump prices, you may appreciate that the prices of pekoleum
products have been increasing globally.
ii. The increase in global prices was initially triggered by the post COVID-19 opening
of global economy which required much more products than suppliers could meet.
This resulted in products scarcity and supply prices increased.
iii. The keight also increased due to the fact there was a high demand for ships yet
during lock downs, business was low and new ships were not being manufactured
and some old ones that were no longer sea worthy could not sail. This has resulted
in high freight costs.
iv. The Russia - Ukraine war has further affected the supply chain resulling in high
supply premiums since products kom lhat regron can longer be accessed.
v. The USD:UGX exchange rate has also affected the prices tremendously with OMCs
facrng exchange losses.

Actions Required
vi. Rt Honourable Speaker, while pnces of all products are currently high, the focus
remains on sustaining supply to allow the market continue to determine pump prices.

The l\4inistry commits to

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 t. Conlinue to engage the Government of Kenya to keep the supply route active.
ii Encourage Ugandan OMCs to further increase their usage of the Tanzania
route so as to reduce risks associated with supply disruptions / interruptions.
t Closely monitor the industry to ensure that it continues to thrive in a free and
fair competitive environment.

For God and My Country!

0kaasai Sidronrus Opolot (MP)

Minister of State for Energy also holding portfolio for Minister of Energy and Mineral
Development
P.O. Box 7270
KAMPALA