Uganda is engaged in ongoing discussions with Tanzania to import its fuel via the port of Dar es Salaam. This potential shift marks a departure from Uganda’s historical reliance on Kenya’s Mombasa port.

For years, Uganda has expressed dissatisfaction with its oil import system, particularly the arrangement whereby Ugandan fuel companies procure 90 percent of their supplies through Kenyan intermediaries.

This dependency on Kenya has left Uganda vulnerable to supply disruptions and inflated oil prices.

Tanzania emerges as a strategic partner in this endeavor, with a long-standing history of cooperation with Uganda across various sectors.

The warm relations between the two countries date back to the 1960s, rooted in their shared journey to independence from the British Empire. 

Currently, Uganda and Tanzania are negotiating a host government agreement (HGA) with a consortium of international oil companies for the development of Uganda’s oil reserves. 

Additionally, the two countries are working on a $3.5 billion project to construct the East Africa crude oil pipeline (EACOP). The pipeline will be the longest heated oil pipeline in the region.

The potential rerouting of Uganda’s oil imports through Tanzania holds several strategic implications and opportunities.

By diversifying its fuel import sources, Uganda aims to mitigate supply disruptions, reduce investment costs, and maintain affordable energy services. 

Moreover, this move could stimulate the emergence of new industries and export-oriented activities, driving economic growth and resilience across the region.

However, alongside these opportunities lie several challenges that warrant consideration. Transportation costs, infrastructure limitations in Tanzania, and concerns over supply disruptions loom large as Uganda navigates this transition. 

Furthermore, the geopolitical dynamics and potential impact on dollar exchange rates between Uganda and Tanzania add another layer of complexity to the negotiation process.

President Yoweri Museveni of Uganda has been vocal about the need for a more efficient and reliable oil import system. He accused Kenyan middlemen of inflating oil prices by up to 58%, causing significant losses for Uganda. 

His remarks also align with Uganda’s broader Energy Transition Plan (ETP). The plan emphasizes the importance of scaling investment, balancing risks, and maintaining affordable energy services through diversified funding sources.

Energy Minister Ruth Nankabirwa confirmed Uganda’s negotiations with the Tanzanian government, citing the refusal of the Kenyan government to grant the required license for oil imports. 

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Uganda had filed a lawsuit against Kenya due to its refusal to grant access to the Kenya Pipeline Company (KPC) infrastructure.

This refusal pertained to transporting refined petroleum products from the Mombasa port to Uganda. Italso came despite instructions from Uganda’s Cabinet under a new arrangement.

In the legal action, Uganda alleged that Kenya had denied the Uganda National Oil Company (UNOC) the opportunity to function as an Oil Marketing Company (OMC) within Kenya’s territory.

Despite concerns about the potential impact on Kenya’s economy, Uganda’s decision to reroute oil imports through Tanzania could have far-reaching benefits for regional trade and cooperation. 

By leveraging this opportunity, Uganda aims to enhance its energy security and economic resilience. Additionally, Uganda seeks to strengthen partnerships and unlock new avenues for growth and development across East Africa.