Uganda is taking Kenya to court in the East African Court of Justice (EACJ) over a legal dispute which has arisen after Kenya denied local licensing to Uganda’s state-owned oil marketer, the Uganda National Oil Corporation (UNOC).
Notably, this is the first time two member states of the East African Community (EAC) have brought each other to court.
The issue arises from Kenya denying UNOC local licensing in November of 2023, which would have allowed them to operate within Kenya, and thus allow Uganda to directly import petroleum. Presently, Uganda imports 2.5 Billion litres of petroleum, valued at approximately 2 billion dollars. Kenya handles 90% of Uganda’s imports. Uganda has stated that the denial of a license, which is based upon a list of requirements that UNOC has stated is an “unnecessary hindrance”, walks back a commitment made by Kenya in April of 2023 to ensure that Uganda’s hope to import their own oil would be achieved by January of 2024.
As stated, Kenya handed UNOC a list of requirements for attaining local licensing, which UNOC has protested. The requirements which UNOC has protested included proof of annual sales of 6.6 million litres of super petrol, diesel, and kerosene, ownership of a licensed petroleum depot, and a minimum of five retail stations locally.
“UNOC found the above requirements an unnecessary hindrance to the implementation of its petroleum policy as the petroleum products in issue were wholly transit goods not destined for the Republic of Kenya” – Uganda’s Attorney-General
UNOC argued that they had fulfilled all other requirements, including registering a branch within Kenya.
The Bigger Picture
As stated, Kenya handles the vast majority of Uganda’s oil imports through their ports, and the Kenya Pipeline Company (KPC). Due to the large volume of imports, Uganda is Kenya’s biggest customer for their transport market. Uganda’s wish to import their petroleum directly comes from issues which arose from a deal which Kenya signed with Saudi ARAMCO, the Abu Dhabi National Oil Company, as well as the Emirates National Oil Company, in order to import their oil to Kenya. Ugandan President Yoweri Museveni has claimed that following the deal, which was originally signed in March 2023 and extended in September, that Kenyan middlemen are driving up prices when selling to Uganda, resulting in them having the regions highest pump prices (1.44$ per litre of super petrol compared to Kenya’s 1.37$).
Uganda’s plan to operate using Kenya’s oil transportation infrastructure will allow them to purchase oil directly from Vitol Bahrain, which Museveni has stated will lead to lower pump prices.
Throughout the months long dispute, particularly since the renewal of Kenya’s deal with the three Gulf companies in September, Uganda has been searching for potential alternatives to relying upon Kenya for importing their oil. Tanzania’s port of Dar es Salaam has been brought up as a potential alternative, and conversations between the governments of Uganda and Tanzania have taken place on the matter, however the KPC has far superior networks for the importation, prompting Uganda to push hard on Kenya granting UNOC the local operating license.
If Kenya were to lose Uganda’s transportation market in favour of Uganda moving to Tanzania, it would spell significant economic trouble for Kenya’s transport market.