Kenya is considering an out-of-court deal on the oil importation stalemate with Uganda.
It is also backtracking on its earlier decision on licensing Uganda National Oil Company to import products through Mombasa.
Energy and Petroleum Cabinet Secretary Davis Chirchir has indicated the country is willing to license Unoc, softening its earlier stand that saw Uganda sue Kenya at the East African Court of Justice (EACJ) in January, for refusal to allow its state set base in Kenya.
The Energy and Petroleum Regulatory Authority (EPRA) had denied Unoc an import licence through the Port of Mombasa, citing the failure to meet set rules.
According to EPRA, Unoc could not substantiate the requisite annual sales volumes of 6.6 million litres of super petrol, diesel, Jet A1 or kerosene in Kenya, among other requirements, to qualify for a licence.
This dealt a blow to Unoc which had targeted to start importing refined products in January, in a policy shift by Kampala to import its own products through the state agency, which the government said would help manage fuel prices and stabilise supply in the country.
Oil Marketing Companies (OMCs) operating in Kenya have traditionally imported petroleum products and sell to Uganda's OMCS, where products are moved through Kenya Pipeline Company infrastructure to the Eldoret and Kisumu depots, before being loaded into tankers and lake transport for last-mile delivery.
“We don’t have any problem with licensing Unoc,” Chirchir said during a press briefing at the KPC headquarters yesterday, where the state corporation gave a Sh5 billion interim dividend cheque to the government (National Treasury).
According to the CS, initial concerns were from the OMCs, who felt the move by Uganda would take away their business.
The push by Uganda however came at a time when Kenya had entered into a government-to-government fuel import deal with the gulf to ease pressure on the country’s forex reserves, at a when the shilling hit its lowest against the US dollar.
The country remains tied to the oil import deal until December, according to EPRA, with two more Oil Marketing Companies joining the league.
One Petroleum Ltd and Asharami Synergy have joined Galana Oil, Gulf Energy and Oryx Energy, bringing the total number of OMCs in the deal to five.
Gulf-based oil giants Saudi Aramco, Abu Dhabi Oil Company (ADNOC), and Emirates National Oil Company (Enoc) pick an OMC for each cargo being shipped to Kenya.
Under the deal, the appointed OMC owns the product, which it receives at the Port of Mombasa and sells to peers in shillings before being supplied to retailers.
Kenya’s hard stance on licensing Unoc was also seen as a strategy to defend its local players and export market in Uganda.
The stalemate saw Tanzania seize the opportunity to lure Uganda to use the Dar es Salaam port, with President Samia Suluhu’s government offering to register Unoc, a move now said to have worried Kenya which fears of losing its export market.
Last month, President William Ruto met his Ugandan counterpart Yoweri Museveni to resolve the import row, where the Kenyan leader said they had agreed on a way forward and “the issues will be settled in no time.”
Chirchir yesterday said Kenya has nothing to lose even if Unoc was to be licensed and solely imports Ugandan products, as it will still use Kenya’s pipeline to Eldoret and Kisumu.
“Whether or not, Kenya Pipeline wills till transport products. It is not a major issue,” he said.
Meanwhile, Kenya is keen on the revived plans to extend the pipeline network to its Malaba (Kenya-Uganda border), with Uganda expected to construct a link line to Kampala.
The project is said to kick-off in December this year according to insiders.
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.
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.
“The pipeline will allow us to serve the region better through the port of Mombasa,” said Chirchir.
Kenya has in recent years lost a sizeable export market share to Tanzania, with Uganda being a major battleground for the two countries.
Uganda imports an average of 2.5 billion litres of petroleum annually valued at about $2 billion (Sh263 billion), with KPC handling at least 90 per cent of the volumes.
Unoc is said to have started selling petroleum products to OMCs as it tests the market ahead of rolling out a direct import deal with Vitol Bahrain.