- Uganda's oil partnership shift costs Kenya over $200 million.
- Tanzania emerges as Uganda's alternative oil import destination.
- Kenya's energy industry faces uncertainty with potential impacts on major investments.
Kenya loses $200 million amidst oil dispute with Uganda
Kenya’s oil fallout with Uganda late last year has amounted to an estimated $200 million loss. New data shows that the loss extended for three months, as Uganda opted for an alternative oil partner in October 2023. Both East African countries had an oil dispute last year which led to a swift and decisive response from Uganda.
Kenya loses $200 million amidst oil dispute with Uganda
Kenya and Uganda have been at odds with each other since October last year, over the future of their respective energy industries. Uganda said in November that it will begin working with Tanzania for oil imports rather than Kenya.
This month, Uganda decided that it would officially be switching to Tanzania for oil imports after failing to get its national oil marketer, Uganda National Oil Company (UNOC), licensed in Kenya to ease imports through the Mombasa port, as reported by the East African.
This dispute originated from Uganda’s displeasure with Kenya over a golf deal the country signed with the United Arab Emirates and Saudi Arabia, which Uganda deemed harmful.
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As previously stated, Kenya has already lost over $200 million as a result of these repercussions, and analysts fear that the damage will only increase.
“You can’t sit there and be at the mercy of one person. So far, I have met the President of Tanzania. My president sent me as an envoy and we are in discussions,” Ugandan Energy Minister Ruth Nankabirwa stated.
“So, we know that the alternative route could be expensive because of the logistics that are involved but we also know that there is a possibility of a negotiation with the government of Tanzania, to waive some taxes so that their sister country can be able to do business,” she added.
The energy minister noted that the dispute between both countries on the issue seemed to have been taking a positive turn, especially with the positive response from the president of Kenya, William Ruto, but actions so far have been contrary, including court cases.
“The president sent me to meet President Ruto four times and he was so supportive on all the times then he sent me, my brother Chirchir [Davis], the Minister of Energy, and some [Kenyan] people jumped in court, what do you do if you are sued? You wait for the ruling. So we have been talking and we are continuing to talk but now, we have a time frame because we feel the pump price in Uganda should be lower,” she said.
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If the ruling stays, it will jeopardize Kenya's $385 million investment in the Kipevu Oil Terminal 2 (KOT2) in Mombasa, which opened last year, and the $170 million fuel jetty in Kisumu.
Kenya's primary trade destination for imported petroleum products, including super gasoline, diesel, kerosene, and Jet A-1 aviation fuel, is Uganda. Through Kenya, it imports over 900 million liters of petroleum products each month.
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