Ugandan parliament on Tuesday passed the Petroleum Supply (Amendment) Act, 2023 granting Uganda National Oil Company (Unoc), a monopoly on supplying petroleum products.
This comes against warnings that the move could instead worsen the problem it is intended to cure.
The bill, first tabled before parliament on October 31, was expeditiously processed and passed by a quorum of 186 members announced by Speaker Anita Among who presided over the sitting.
If assented to by the president as passed, the law will “facilitate the Unoc or such other person nominated by the minister, with the approval of Cabinet, to import all petroleum products, as listed in the third Schedule, destined for the Ugandan market to guarantee security of supply in the country.”
Unoc is a limited liability company owned by the Government of Uganda (GoU), mandated to handle the state’s commercial interests in the petroleum sub-sector.
Government has argued that this move will cure the reliance on private oil marketing companies and eliminate middlemen, factors they say have contributed to instability in supply and unpredictable pump prices.
“If the international prices do not go up, we expect that we shall have competitive prices under this new system. All we wanted is to make sure that we run away from the system that has been exploiting Uganda. We hope that our neighbours, will understand this and that we are doing this for the betterment of the people of Uganda,” Ms Ruth Nankabirwa, the minister of Energy and Mineral Development, said after the bill was passed.
But a section of legislators in the minority report, argued that making Unoc sole importer and supplier, would do very little in addressing the high fuel prices.
Also in contention was the arrangement for Unoc to work with another contracted monopoly-Vitol Bahrain, tasked with sourcing products from refineries for direct supply.
According to a report, Unoc lacks the financial capacity to source products directly from the refineries, which forced them to enter an agreement with Vitol; an international energy company that will be the sole supplier to Unoc for five years.
Legislators, however, questioned how Vitol Bahrain was sourced and why the agreement was entered without consulting Parliament.
The report further states: “The committee noted that hand-picking of Vitol Bahrain EC and creation of a monopoly for it to supply Unoc was not justified. Submissions from entities like HEK International Ltd (representing Maersk Line Limited) and E3 Group asserted their capacity to finance the supply of petroleum products to Unoc. Maersk Line Limited expressed their ability to offer a bank guarantee to Unoc so that Unoc directly deals with oil refineries.”
The report also argued that the law violates Article 2l of the Constitution, which provides for a right to equality and freedom from discrimination, as well as international instruments, including the Common Market for Eastern and Southern Africa Competition Regulations 2004 and the East Africa Community Competition Act 2006.