Uganda Moves to End Monopoly on Kenyan Route for Oil Imports
(Bloomberg) -- Uganda is exploring ways to cut its reliance on Kenya for fuel imports, routing shipments through neighboring Tanzania as an alternative source of supply.
The potential move to diversify its imports could jeopardize business for Kenya’s Mombasa port, since about three-quarters of the terminal’s transit cargo is sent to Uganda. Mombasa has already been fighting to stave off growing competition from the Tanzanian ports of Dar es Salaam and Tanga.
Uganda Railways Corp. last week began a trial delivery of 500,000 liters of petroleum products across Lake Victoria, resuming shipments after a 16-year hiatus, acting Managing Director Stephen Wakasenza said by phone. The fuel initially landed in Dar es Salaam and was transported by train to Mwanza port, before being sent onward to Uganda over the giant fresh-water lake.
Mombasa also serves South Sudan, the Democratic Republic of Congo, Rwanda and Tanzania. The region’s over-reliance on the Kenyan port came into sharp focus in 2007 when post-election violence that rocked East Africa’s biggest economy disrupted supply chains to the landlocked nations.
“We are comfortable with Mombasa, but as a country we need an alternative route for strategic reasons,” Wakasenza said Tuesday. “We are targeting oil because it is a product used daily.”
Uganda plans to start its own oil production, but that’s unlikely to happen until 2025. The government intends to build a crude-export pipeline via Tanzania.
The trial fuel cargo was for Stabex International Ltd., Wakasenza said, suggesting there may be interest in the route from other importers as Uganda’s demand for petroleum imports is rising at an annual rate of 7%.
The country consumes about 185 million liters of fuel products every month, with most of it trucked through Kenya, according to John Friday, the assistant commissioner for petroleum supplies. URC aims to use two routes across Lake Victoria -- from Tanzania’s Mwanza port and from Kenya’s Kisumu port -- bringing in a total of 10 million to 20 million liters a month. It’ll seek to boost capacity to 40 million liters once it imports additional wagons, Wakasenza said.
The state-owned company has a tanker capable of hauling 880 tons and making 10 voyages a month, according to the director, who said it also has a second vessel under repair. In addition, it will rely on a Kenyan-owned boat which already supplies about 4 million to 6 million liters a month from Kisumu, and a Tanzania-registered vessel.
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