Uganda’s announcement that it will stop importing petroleum products in five years’ time has renewed pressure on Kenya to rethink its trade with the western neighbour to stave off a looming revenue loss and a possible shift in the balance of trade.
Simon D’Ujanga, Uganda’s Energy minister, last week told Reuters that his country will stop importing petroleum by 2015 when the refinery it is building to process crude becomes operational.
Uganda is Kenya’s largest export market that took in Sh44.4 billion worth of goods in the year to November 2009, or 13.3 per cent of the country’s total exports during the same period.
Kenya has relied on shipments of petroleum products to consolidate its dominance as the leading exporter to Uganda, a position that now stands threatened with the discovery of oil in the Lake Albert region.
Petroleum exports account for about 25 per cent of Kenya’s exports to Uganda whose loss would cut the export earnings by a similar margin.
Uganda heavily relies on Kenya for food, agricultural inputs, ores and minerals, metal products such as steel and iron, petroleum and petroleum products, and liquefied petroleum gas (LPG).
This balance of trade has however recently come under threat following Uganda’s discovery of an estimated two billion barrels of oil that it wants to process at a local refinery to meet the domestic needs and export.
Construction of the $1.3 billion refinery is set to start next year and will give Uganda the capacity to process 100,000 barrels of oil per day.
“That’s why we are insisting that this Eldoret-Kampala pipeline extension must have a reverse flow, because we’ll need to export fuel instead of importing,” said Mr D’Ujanga.
Kenya is not a producer of petroleum but has been importing crude for processing at Mombasa for re-export to Uganda and the wider Great Lakes region.
A number of Kenyan oil marketers such as KenolKobil, OiLibya and Total currently service the Ugandan market.
Industry estimates show that more than 80 per cent of Uganda’s 715,000 tonnes annual petroleum consumption is shipped through Kenya — the bulk of it by the Kenya Pipeline Company (KPC).
Only about 115,000 tonnes of the annual petroleum product demand moves to Uganda by road.
Uganda’s new plan to stop importation of petroleum products by 2015 is expected to trigger a fresh sense of urgency for Kenya to re-think its trading mix to protect revenue streams.
“We haven’t seen much from the government but we believe it is time we moved swiftly to seize opportunities from the emerging dispensation,” said Gilbert Lang’at, the chief executive of Kenya Shipping Council. “We should, for instance, negotiate a deal that will offer us a chance to refine part of Uganda’s oil,” he said.
Source: http://www.businessdailyafrica.com/Company%20Industry/Uganda%20hits%20Kenya%20with%20oil%20trade%20shock/-/539550/892868/-/bi0exqz/-/
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