Serrari Group

In a tug-of-war over energy dominance, Kenya finds itself counting the costs of a bitter dispute with its neighbor, Uganda, as the latter pivots towards Tanzania for oil imports. Since October last year, tensions have simmered between the two East African nations, fueled by Uganda’s decision to seek alternative energy partnerships.

Following Uganda’s announcement in November of its intention to collaborate with Tanzania for oil imports, Kenya faced a significant blow as Uganda’s national oil marketer, Uganda National Oil Company (UNOC), failed to secure licensing in Kenya for smoother imports via the Mombasa port, as reported by the East African.

The genesis of this rift traces back to Uganda’s discontent with Kenya over a controversial Gulf deal inked with the United Arab Emirates and Saudi Arabia, a move perceived as detrimental by Ugandan authorities.

As the dust settles, Kenya is grappling with tangible losses, surpassing the $200 million mark, with analysts warning of further economic repercussions on the horizon.

Despite glimpses of diplomatic breakthroughs, challenges persist. Minister Nankabirwa highlighted the vexing issue of legal hurdles, lamenting interruptions in the dialogue process due to court cases. “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 asserted.

The stakes are high for Kenya, with its $385 million investment in the Kipevu Oil Terminal 2 (KOT2) in Mombasa and the $170 million fuel jetty in Kisumu hanging in the balance. The looming uncertainty threatens to disrupt Kenya’s vital petroleum trade, which sees over 900 million liters of petroleum products flowing through its ports each month, with Uganda as a primary destination.

As both nations navigate the complexities of the energy landscape, the outcome of this dispute remains uncertain, with economic interests and diplomatic relations hanging in the balance.

By: Montel Kamau
Serrari Financial Analyst
31st January, 2024

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