The Port of Mombasa, a key hub for transit goods, is bracing for a significant revenue loss as Uganda prepares to sever its ties with Kenya’s Oil Marketing Companies (OMC), which is set to impact its financial standing.
Uganda, a landlocked country that relies on Mombasa for 90 percent of its fuel imports, recently announced its intention to utilise its national oil entity, the Uganda National Oil Company (UNOC), for procuring and distributing petroleum products to its OMCs.
This shift is a direct response to Kenya’s decision to engage in a Government-to-Government agreement with Gulf nations, without the involvement of Kampala.
Uganda contends that this arrangement has disrupted local fuel prices and left them susceptible to supply shortages.
As a consequence, Uganda is now poised to redirect a substantial portion of its oil-related operations to the Port of Dar es Salaam, a move that will adversely affect transit cargo.
Kenya’s OMC, previously a principal supplier of oil to Uganda, will be compelled to reduce their monthly orders due to the dwindling demand from Uganda.
William Ojonyo, the former CEO of the Kenya International Freight and Warehousing Association, says Mombasa is expected to experience a notable decline in cargo volumes and revenue as a result of the latest announcement by Kampala.
“With Uganda’s planned withdrawal, the volumes and revenue will decrease as oil orders are contingent on prevailing demand,” he said,
Kampala’s Uganda National Oil Company has already entered into a five-year contract with Bahrain EC to supply fuel to its OMCs. Additionally, Uganda has disclosed its intent to establish a buffer stock in Tanzania and in Mpigi district to ensure a consistent supply of petroleum products.
“To guarantee supply security, the partnership has arranged for buffer stocks in both Uganda and Tanzania, which can be accessed in the event of supply disruptions in the country,” said Uganda’s Ministry of Energy.
Mr Ojonyo has cautioned that Kenya could suffer substantial losses if Uganda decides to import its entire consignment through Tanzania.
“There may be instances where certain ships can only dock in Kenya and not in Tanzania, leading them to choose the Port of Mombasa. However, this outcome is not assured, as Uganda may opt for smaller quantities of fuel imports,” he said.
Kenya entered into a deal with UAE and Saudi Arabia in March that would see Nairobi import diesel, super petrol and jet fuel on credit in a deal in order to ease dollar demand and avert the weakening of a shilling.
gandae@businessdayafrica.org