What’s Happening
A month’s long dispute between Kenya and Uganda over oil importation licenses has finally come to an end.
The dispute between the two nations began when Kenya refused to provide licenses to the Uganda National Oil Corporation (UNOC) in order to allow them to operate locally, and use the oil transportation infrastructure of the Kenya Pipeline Company (KPC) in order for UNOC to handle Uganda’s oil importation directly, rather than going through Kenyan companies to do so.
The plan is to allow Uganda to import oil from Vitol Bahrain. Uganda had struck a deal to purchase oil from Vitol Bahrain after Kenya had signed a deal with Saudi ARAMCO, the Abu Dhabi National Oil Company, as well as the Emirates National Oil Company in March of 2023 to import oil from the three companies. Uganda claimed that this deal led to increased oil prices within Uganda due to markups from Kenyan middlemen, resulting in Uganda having the highest pump prices in the region. Due to this, they sought to handle their own oil imports.
Kenya had been negotiating a deal with Uganda in order to facilitate UNOC’s local operating licenses, a deal which was supposed to be operational by January of 2024. However UNOC’s license was denied, due to Kenya claiming they did not fulfill a list of requirements, requirements which UNOC claimed were an “unnecessary hindrance.”
The denial led to a significant diplomatic dispute between the two nations, which saw Uganda take Kenya to the regional East African Court of Justice, marking the first time one nation of the East African Community (EAC) had brought another EAC member to the court.
Kenya handles the vast majority of Uganda’s oil imports, handling approximately 90%. Uganda imports around 2.5 billion litres of petroleum each year. As such, Uganda is Kenya’s biggest customer for their transportation market.
Following the fallout between Kenya and Uganda, Uganda began searching for alternatives, largely setting their eyes on Tanzania. Uganda began importing some oil from Dar es Salaam in Tanzania, however Kenya’s oil transportation infrastructure is far superior to that of Tanzania’s, which prompted Uganda to still seek ways to bring the Kenya deal to fruition.
The Issue Resolved
Kenya has finally relented, and is set to issue the license to UNOC, allowing them to operate locally. UNOC will still use KPC’s transportation infrastructure, and so there will be no revenue loss for KPC, however there will be a loss amongst local oil companies as Uganda is able to facilitate their own oil importation.
It is expected the license itself will be issued next month, in April.
