Museveni: Clarifies Uganda Direct Fuel Deal, Cites Past Intermediaries

• Ugandan President Yoweri Museveni clarified that his recent comments on fuel procurement referred to Uganda's past system, not an accusation against Kenya's current government.
• Uganda transitioned its petroleum procurement in 2023 to a direct arrangement with global energy trader Vitol.
• This new direct deal significantly reduced premiums for diesel, petrol, and aviation fuel, cutting costs by tens of dollars per metric tonne.
• President Museveni thanked Kenyan President William Ruto for supporting the new arrangement and ensuring Uganda's access to Kenya's oil pipeline infrastructure.
• The move highlights a regional shift towards direct procurement, impacting East Africa's energy supply chain and the role of intermediaries.

This strategic shift towards direct procurement, facilitated by a global energy trader, marks a significant departure from previous intermediary-reliant models and is poised to reshape East Africa's energy supply chain dynamics.

Ugandan President Yoweri Museveni recently issued a clarification regarding his earlier statements on petroleum imports, asserting that certain segments of the Kenyan media had misconstrued his remarks. President Museveni emphasized that his original comments pertained exclusively to Uganda's historical petroleum procurement system, rather than serving as an accusation against the current Kenyan government. He specifically noted that his observations were directed at a past arrangement where Uganda acquired petroleum products through intermediaries operating within Kenya.

This clarification comes amidst a significant overhaul of Uganda's fuel import strategy. In 2023, the nation transitioned to a direct procurement model, establishing an agreement with Vitol, a globally recognized energy trader possessing extensive refinery and bulk-supply capabilities. This strategic shift has yielded substantial financial benefits for Uganda, evidenced by a marked reduction in the premiums paid for petroleum products. An agreement formalized on August 18, 2023, illustrates these savings: the premium for diesel decreased from US$118 to US$83 per metric tonne, petrol premiums dropped from US$97.50 to US$61.50 per metric tonne, and aviation fuel saw a reduction from US$114.25 to US$79.25 per metric tonne.

The impetus for Uganda's reform in petroleum procurement dates back to approximately 2019, when the late Kenyan politician and former Senator Cyrus Jirongo brought the issue of intermediary involvement to President Museveni's attention. Jirongo highlighted that Uganda was purchasing its petroleum products via Kenyan middlemen, prompting President Museveni to instruct then-Energy Minister Irene Muloni to investigate and address the matter. Despite initial attempts to tackle the issue, significant structural changes were not fully implemented until the 2023 arrangement with Vitol.

President Museveni explicitly stated that his recent remarks, which some Kenyan media outlets had interpreted as critical of the current Kenyan administration, were in fact a reflection on this outdated procurement system. He characterized the media's interpretation as adding 'pilipili' (red pepper) to his words, implying a misleading sensationalization. The move towards direct procurement from bulk suppliers like Vitol represents a fundamental shift in how Uganda secures its fuel, aiming to streamline the process and reduce the overall cost of importing these essential commodities.

A crucial element in the success of Uganda's new direct fuel deal has been the support from the Kenyan government. President Museveni publicly acknowledged and thanked Kenyan President William Ruto for his intervention, which helped overcome resistance from certain actors within Kenya. This support was instrumental in securing Uganda's access to Kenya's vital petroleum infrastructure, enabling the landlocked nation to transport its directly imported fuel through the Kenyan oil pipeline. Uganda maintains a 20.15 percent shareholding in this pipeline, underscoring its vested interest in the regional infrastructure.

This collaborative effort ensures that Uganda can continue utilizing Kenya's established infrastructure even as it fundamentally alters its fuel sourcing methods. The development has also brought renewed scrutiny to the role of intermediaries in regional petroleum supply chains and the overall cost of importing refined fuel through East African ports. Concurrently, Museveni's earlier comments had drawn attention to Kenya's own Government-to-Government (G-to-G) petroleum import arrangement, which was introduced in 2023. Kenyan Energy and Petroleum Cabinet Secretary Opiyo Wandayi defended the G-to-G framework, explaining it was implemented to mitigate a severe US dollar shortage in 2022 that threatened the nation's fuel supplies and other critical imports.

Uganda's successful transition to a direct fuel procurement model with Vitol carries significant implications for the broader East African energy landscape. The substantial reduction in fuel premiums directly benefits Ugandan consumers and businesses by lowering operational costs, thereby fostering economic stability and growth. This strategic shift towards direct procurement, facilitated by a global energy trader, marks a significant departure from previous intermediary-reliant models and is poised to reshape East Africa's energy supply chain dynamics.

The precedent set by Uganda's experience could encourage other nations in the region to re-evaluate their own fuel import strategies, potentially leading to a broader trend of direct sourcing and reduced reliance on middlemen. For legal and compliance teams across the East African energy sector, this development signals a need to assess existing contracts and business operations, as a shift away from traditional intermediary roles could impact regional supply chain agreements and market structures. The collaborative spirit demonstrated by Presidents Museveni and Ruto in navigating this change also highlights the potential for regional partnerships to address complex economic challenges and enhance energy security.

Legal and compliance teams in the East African energy sector should evaluate the implications of Uganda's direct fuel procurement model with Vitol, as it signals a strategic shift away from intermediaries that could affect regional supply chain contracts and business operations.

Source: Original reporting via regional news outlets.