Oil Companies Split Over New Fuel System

Wednesday, 13 October 2010 00:00 Walter Wafula
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Kampala | Oil firms; Shell, Total and Kobil Uganda are divided over a new open tender system of importing petroleum products into the country. Under the system, the firms will be required to import their petroleum products into Uganda as a single unit as opposed to multiple sources. Mr Ivan Kyayonka, the Shell Uganda’s country manager, told Daily Monitor on Monday that the system proposed by the government will not solve the fuel supply crisis that the country is experiencing. “The underlying problem is the inability of the pipeline to deliver fuel at speeds the market demands,” Mr Kyayonka said.

Uganda’s oil companies receive their petroleum products through the Kenya oil pipeline, which runs from Mombasa to Eldoret through Nairobi. The importers then offload fuel from either Nairobi or Eldoret. This means they cannot access their products even if they are available in Mombasa –a bottleneck that they want addressed.

The Energy Minister, Mr Hilary Onek, last week told Parliament that the government is adopting the system as one of the measures to address the fuel shortage. The crisis started last month with fuel prices shooting to about Shs4,000 per litre of petrol and Shs2,500 for diesel. It has also led to a reduction in supply of thermal power by Aggreko and Jacobsen Uganda.

The government says the open tender system will partly eliminate the supply hiccups by awarding importation licences to oil companies with the ability to import large volumes on behalf of others.

Despite adopting the practice, Kenya has for the last one month faced a fuel shortage just like its landlocked neighbours. Uganda moved to adopt the open tender system this month after Kenya migrated to the system to deal with the hoarding of fuel by some “greedy” fuel importers.

Kenya recently announced that only companies with import and trading licences will transit fuel through its land. While Shell is opposed to the system, Total and Kobil Uganda, welcomed the new system, but with reservations.

Mr Mamadou Ngom, the Total managing director, said the system is good because importing fuel as a single firm, would give the oil marketers higher bargaining power. “If you go as a group, you can negotiate for better prices and bring in more products. That benefit would then be passed on to the consumers,” Mr Ngom sais. “We want to be part of it because we believe it can bring stable supplies to the market.”

Total, however wants the government to give major exporters priority to bring in their products with ease. “If we are allowed to ship in our products from Mombasa, it will reduce the prices because then, we will incur lower delay charges.” Mr Peter Ochieng, the marketing and operations manager of Kobil Uganda, suggested that the system should be restricted to only registered oil companies in Uganda

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