Uganda, Tanzania discuss final details as Kampala dumps Mombasa for Dar-Tanga route in protest

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KAMPALA – The Ugandan delegation led by Energy Minister Ruth Nankabirwa Wednesday confirmed they had met Tanzania President Samia Suluhu Hassan in Zanzibar to discuss the final details of preparation to commence the importation of petroleum products through the Dar es Salaam sea route as well as establishing a refined petroleum products pipeline from Tanga port to Kampala.

Minister Nankabirwa said on her X (formerly Twitter) handle:
“Today, in Zanzibar I met with Her Excellency The President of Tanzania @SuluhuSamia to progress the discussions on the supply of Petroleum Products into Uganda and the desire by @GovUganda to increase its petroleum products imports through Tanzania”.
She added;

“Uganda is committed to strengthening the utilization of the Tanzanian route, improving the supportive infrastructure, and any processes required to realise the policy change by @GovUganda to empower @UNOC_UG to be the sole importer and supplier of petroleum products for Uganda”.

Today, in Zanzibar I met with Her Excellency The President of Tanzania @SuluhuSamia to progress the discussions on the supply of Petroleum Products into Uganda and the desire by @GovUganda to increase its petroleum products imports through Tanzania. pic.twitter.com/PxH24F9Uz6

— Ruth Nankabirwa Ssentamu (@NankabirwaRS) February 20, 2024

A select Ugandan technical team has been in Dar es Salaam for the last two weeks working out the finer details of the arrangement with their Tanzanian counterparts, especially to work out how to make Dar es Salaam and Tanga ports viable.

It is understood that the recommendations by technocrats of the two countries guided the discussion between the top leadership of Uganda led by Minister Nankabirwa and the Tanzanian team led by President Samia.
A source close to the negotiations told this website that at Tuesday’s meeting, Tanzania expressed willingness to do what it takes to make the northern route as cost-effective as that of the central corridor to attract more volumes of petroleum products to be handled through its ports.

The source further intimated to this writer that Tanzania is excited by the opportunities opened up by the arrangement because the country will benefit more from increased traffic and volumes of the products.
For example, at the moment about 650 trucks carrying petroleum products destined for Uganda go through Tanzanian territory per month, but under the new proposed arrangement, the number would grow to beyond 3000 trucks monthly given the volume Uganda is committed to giving Tanzania.

A source from the Tanzanian Ministry of Finance said:

“Tanzania had for many decades vainly tried to break Mombasa’s logistical dominance due to its cost-effectiveness, developed petroleum infrastructure facilities, and its proximity to Uganda, but now, God has presented this new opportunity on a silver platter to us and so we must do whatever it takes to utilize it quickly and maximally”.

Indeed, Tanzania has been working overtime to see that it replaces Kenya as the main gateway for exports and imports for Uganda and other landlocked countries of East Africa and is a few inches away from achieving her dream. For instance, by 2025, the SGR connection from Dar es Salaam to Uganda’s doorsteps of Mwanza on the shores of Lake Victoria will be complete. Tanzania has further upgraded Mwanza by widening and deepening the port’s berths and entrance channels to enable Panamax size roll-on, roll-off vessels with the capacity to transport and deliver cargo to Uganda’s ports of Bukasa and Port Bell on Lake Victoria in less than 8 hours.

The Isaka–Kigali Standard Gauge Railway construction is commencing soon while the Tabora-Kigoma – Uvinza-Malagarasi – Musongati in Burundi SGR project has already received funding from The African Development Bank (AfDB.)and construction is scheduled to begin soon. This means that in the next 3 years, containers can depart Dar es Salaam and reach Kampala, Kigali, and Bujumbura in less than 24 hours.

According to reports from the Ministry of Energy in Kampala, the logistical cost difference between the Kenyan and Tanzanian route for the importation of petroleum products for Uganda is about US$ 49 per tone and according to reliable sources, The technical teams that have been discussing in Dar-es-Salaam for two weeks have already figured out solutions to reduce this difference to the bear minimum possible so that Dar es salaam re places Mombasa as the main gateway for petroleum products destined for Uganda.

However, according to Uganda’s Energy Minister, Nankabirwa, the plan to increase the importation of petroleum products through Tanzania using trucks is a stop-gap measure that will commence immediately after the two states finalize logistical interventions in the next few weeks. The permanent intervention Uganda has come up with is to commence with immediate effect the building of a petroleum products pipeline from Tanga in Tanzania to Kampala.

Uganda and Tanzania have already secured 1,443 kms of corridor from Tanga port to Hoima in Western Uganda to build a crude oil pipeline under the East Africa Crude Oil Pipeline Project where the compensation for the right of way is at 99%. The technical teams that are meeting in Tanzania have been tasked to advise the top leadership of two countries in the forthcoming meeting about all the logistical support needed to fast-track the building of petroleum the pipeline whose feasibility study is commencing in a month’s time.

According to some economists interviewed by this website, if Uganda proceeds with its Tanzanian plan, it would cause significant revenue harm to Kenya Pipeline Company (KPC), which depends heavily on the Ugandan volumes for its operations in western Kenya.

“Kenya earns more than US$ 108 million per month from handling the Ugandan petroleum products from Mombasa to western Kenya. Additionally, more than 95% of transporters who move petroleum products from western Kenya to Uganda are Kenyans who charge an average of US$ 40 per cubic meter for the journey from Eldoret and Kisumu to Kampala, resulting in monthly revenue of about US$ 80 million for Kenya,” official figures indicate.
Additionally, Kenya earns about $43.2m from port and associated logistical services related to handling Uganda’s oil imports. In total, Kenya’s economy benefits from Uganda’s oil imports are $ $232m annually. This excludes the revenues earned by various service providers in the cities of Mombasa, Eldoret, and Kisumu that provide food, lodging, fuel dealers, medical, casual laborers, clearing, and forwarding to mention but few.

This impending unprecedented move by Uganda to run to Tanzania results from Kenya’s refusal to grant the government-owned Uganda National Oil Company (UNOC) the licence to use Mombasa port and other oil-related logistical infrastructure to directly import petroleum products destined for the Ugandan market.
In 2023, Uganda took a bold decision to stop the process of purchasing its petroleum products through Kenyan oil companies as it has always been for decades.

They argued that it involved too many middlemen, leading to exploitation and driving up pump prices. Uganda also blamed the Kenyan government for occasionally rationing her fuel imports.

Nevertheless, Uganda needed to use the Mombasa port for its direct importation of petroleum products due to its well-developed petroleum facilities, such as depot terminals and pipelines, and its proximity to Uganda.

The Ugandan Authorities sought assistance from the Kenyan government to facilitate the implementation of this new arrangement through their territory starting in January 2024.

In response, Kenya set tough conditions that would naturally not apply to a state represented by the National Oil Company (UNOC), hence, resulting in the business venture coming to a standstill.

Some individuals in Kenya then also applied for an injunction in Kenyan court against any attempt by the Kenyan government to grant Uganda access to the Kenyan pipeline, which was granted. Kampala is convinced that all this is deliberately orchestrated by Kenyan authorities to frustrate the direct importation plan.

Uganda filed an application requesting the Kenyan court to dismiss the application but the request was denied and when the application was first heard on 6th Dec 2023, then pushed to 19th December 2023, then again to 22nd Jan 2024, then to February 12th, 2024 and now to March 6.

Kampala is sure that Kenya’s regime will continue hiding under court technicalities as long as they still want to deny Uganda the license.

According to the sources, Kampala is not surprised at the deliberate frustrations by Kenya’s government because they expected it. This argument is further amplified by the comments made by Dr David Ndii, the Chief Economic Advisor to Kenyan President William Ruto, who posted on his X (formerly Twitter) account on November 2nd, 2023 after the cabinet of Uganda had just passed the resolution granting UNOC exclusivity to import.

Dr. Ndii asserted that Uganda can only import fuel from overseas if it flies it in; “Will Uganda fly the fuel to their country? he asked”. This quote from chief economic advisor to the head of state was interpreted by Kampala as a true testimony from Nairobi that they will work overtime to ensure that UNOC fails in using Kenya’s territory to execute the deal so Kampala is not astonished at what is happening.

Uganda ran to the East African court to take on Kenya that it had contravened COMESA, East Africa and WTO treaties and conventions by denying her access to the sea coast of Mombasa and the verdict of the case is yet to be reached.

Initially, Uganda planned to have Tanzania handle only crude oil while Kenya continued to be the main route for refined petroleum products in order for Kenya to continue earning from fees Uganda pays for using her petroleum infrastructure facilities. There were even plans for Uganda to extend the petroleum pipeline from the Kenya Rift Valley to Kampala so that when Uganda builds a refinery, the same pipeline would be used to transport Uganda’s fuel to the rest of the world, but all these plans changed suddenly when Kenya denied Uganda the license to import fuel.

The white pipeline will also be responsible for transporting back the refined petroleum products from the refinery Uganda government is about to begin constructing to Tanga port and thereafter, to the rest of the world according to the sources .