Parliament wants national oil firm joint venture terminated
Parliament has recommended for termination of the joint venture agreement between a consortium of three companies and the Uganda National Oil Company (UNOC).
This follows adoption of the report of the Committee on Trade, Tourism and Industry during plenary of Thursday, 03 February 2022, which recommended the termination of the joint venture agreement since the reserves being managed are empty.
On 31 May 2017, UNOC entered into a joint venture agreement with three companies; One Petroleum Limited, Mbaraki Bulk Terminal Limited and One Petroleum Uganda Limited for management and operation of the Jinja National Reserves and Storage Terminal.
The Jinja reserve facility located in Eastern Uganda that the country relies on, has a capacity of 30 million litres which is an equivalent of 4.6 days going by the daily national demand of 2,412 litres.
The committee set out to investigate the cause of the fuel rise following a petition from the public. In the second week of December 2021, fuel hit a record high of Shs15,000 per litre in Hoima district, while in the capital, Kampala, fuel cost of Shs 6000 per litre up from Shs 4000, in the case that one was lucky to find a station with fuel.
While presenting the report to the House, the chairperson of the committee, Mbarara City South MP, Hon Mwine Mpaka, cited irregularities in the agreement between UNOC and the consortium.
Mpaka proposed termination of the agreement as it was breached through various amendments before the expiration of the contract.
The chairperson, in his report, states that although the agreement was signed to stock the Jinja reserves with petroleum to full capacity by 31 July 2017 and worth US$30 million, clause 8.4 stated that the consortium should ensure that the facility would at all times have no less than 40 per cent of the storage capacity as strategic reserves. However, this particular clause was amended.
“Clause 8.4 of the joint venture agreement which provided for the mandatory stocking of at least 40 per cent of the petroleum tanks in the Jinja national reserves at all times was deleted in one of the many amendments and yet it was the cardinal reason as to why government gave UNOC the mandate to run the reserves and ensure that the country has at least 40 per cent strategic reserve at all times and this is one of the reasons the country is in a crisis,” Mpaka revealed.
Although clause 3 of the agreement provided that it would commence on 01 June 2017 for 10 years, the committee was shocked to learn that a year later, on 01 August 2018, UNOC and the consortium signed the first addendum to the agreement and extended the same by five years.
The Government through UNOC, the committee shocked to learn, needed to pay the consortium in case they needed to store petroleum in the reserves. It also took note of the several unregulated fuel stations, fuel hoarding and exorbitant fuel prices among others.
The committee noted that there has been a resource constraint to allocate funding for procurement and stocking of strategic reserves in the country and funding to strategic petroleum supply infrastructure.
Faulty scanners at the border, the committee also found out, caused a backlog of over 400 trucks cleared daily at the Busia border point since its temporary replacement was over eight hours away and this caused the 50km queue of trucks in western Kenya.
Hon Mpaka also recommended that government should urgently prioritise and avail the necessary financial resources to UNOC to procure fuel for the strategic reserve as well as the development of the necessary water transport infrastructure on Lake Victoria which would save fuel transport companies Shs 30 per litre using water transport as opposed to road transport.
Mpaka, in his report, also asked government to fast-track the consumer protection law which would have protected the consumer in this particular circumstance, from exploitation through indiscriminative pricing among others.
The committee also wants the Kampala storage terminal which will store 60 million litres constructed ahead of the Kenya elections in August 022. They also want additional scanners procured and deployed at the borders.
Hon Muhammad Nsereko (INDP, Kampala Central Division) said that pump fuel prices in Uganda continue to rise, adding that the reserve has been mismanaged.
“I posed a question to the Attorney General and UNOC to give the committee the status of the fuel results in Jinja, they stated that we have reserves, but there were no fuel reserves,” Nsereko said.
The District Woman MP for Namayingo, Hon Margaret Makhoha, said that it is disheartening to discover that people who should plan for the country are instead frustrating the country.
“The committee said we do not have oil reserves. This is terrible. We should task those responsible to put the oil reserves,” Makhoha said.
Hon Nathan Itungo (INDP, Kashari County South) said that the Minister of Energy and Mineral Development simply lamented and they have not prevailed on those hoarding fuel.
Deputy Speaker Anita Among asked the energy ministry to explain why Uganda had no fuel reserves. She further tasked the ministry on the agreements and policies signed that caused the fuel crisis artificially.
On the testing at the border point of the truck drivers, Among blamed the Ministry of Health and the Uganda Revenue Authority (URA) for the management and administrative issues that should have been sorted out.
“On this policy, they did not consult anybody and they rushed in a haphazard way - and it ended up affecting the ordinary Ugandans. We should be able to make policies that are for the people of Uganda,” the Deputy Speaker said.
Among directed that people hiking the prices should face the law and asked the minister to organise a team to monitor fuel prices countrywide.