Kenya and Uganda have opened talks on the extension of the petroleum pipeline to Kampala, a major infrastructure development that will shape the region’s fuel imports market.
This comes in the wake of own fuel importation by Uganda, which commenced in early July, ending an era of Kenya-controlled importation and supply of refined products for the landlocked country.
The neighbouring country is importing oil products through a deal between the Uganda National Oil Corporation (Unoc) and Vitol Bahrain.
This is similar arrangement to Kenya’s government-to-government deal with the Gulf oil majors, with Kampala hoping to lower pump prices below what was being offered by dealers in Kenya.
It however continues to use Kenya’s Port of Mombasa (New Kipevu Oil Terminal) and Kenya Pipeline Company (KPC)’s infrastructure to have its products delivered to the Eldoret depot, before last mile delivery by road.
Uganda’s Energy minister Ruth Nankabirwa is leading a delegation in the early planning stages, with the first meeting held in Nairobi this week.
“I am in Kenya to start the planning and preparation for the proposed Eldoret-Kampala-Kigali pipeline,” Nankabirwa said yesterday, noting the Nairobi working trip also involved understanding Kenya Pipeline’s operations, infrastructure and human capacity.
On Tuesday, she chaired a bilateral meeting with Kenya’s Petroleum PS Mohamed Liban together with KPC managing director Joe Sang, among other top Kenya Pipeline managers, where they reviewed the proposed Eldoret Kampala Refined Petroleum Products Pipeline.
The proposed Pipeline was conceived in 1995 under the Joint Co-ordinating Commission (JCC) and was set up through a Memorandum of Understanding (MoU) between Uganda and Kenya.
The feasibility study for the Eldoret to Kampala pipeline extension was awarded to an international firm in 1997 with a report submitted in 1999.
This was after a study funded by the European Investment Bank indicated the project was feasible, including a further extension to Rwanda.
President William Ruto and Uganda’s Yoweri Museveni revived the plans in May this year, agreeing to extend the pipeline to ensure supply and security of petroleum products in Uganda.
Kenya is expected to build a line to from Eldoret to Malaba (Kenya-Uganda border), with Uganda putting up a link line to Kampala.
“We have obliged our respective Ministers to take joint urgent measures to mobilise resources for the implementation of this regional shared infrastructure and report on progress by the end of 2024,” Ruto said in Nairobi, during a recent three-day state visit by Museveni.
The pipeline will extend to Kigali in Rwanda and possibly Bujumbura (Burundi) in the future, with each country responsible for the development of the infrastructure within its borders.
However, a joint "transaction advisor" will be selected to maintain quality control.
Kenya has in recent years lost a sizeable export market for petroleum products to Tanzania, with Uganda being a major battleground for the two countries.
The extension now means Kenya will have an edge over Tanzania on export of refined products through the port and pipeline, even as it loses control of the export market’s sales margins as Uganda moves to import its own products.
Uganda imports an average of 2.5 billion litres of petroleum annually valued at about $2 billion (Sh265.6 billion), with Kenya Pipeline Company handling at least 90 per cent of the volumes.
Nankabirwa’s visit is also timely as Uganda seeks to address costs related issues mainly on the doubling of bond fees for cargoes destined for Kampala and the KPC pipeline charges which will not only affect pump prices in Kenya, but also impact exports.
Meanwhile, Kenya and Uganda are also mulling the extension of the Standard Gauge Railway from Naivasha to Malaba and further to Kampala and DRC, as “an efficient and sustainable infrastructural artery for the transportation of goods.”