The Uganda National Oil Company (UNOC) has started importing and selling petroleum products.
UNOC is the business arm of the Uganda government expected to take care of the business interests in the oil and gas sector. This would include taking part in the supply chain of petroleum products like petrol and diesel.
On Monday evening, the company flagged off UNOC branded petroleum trucks that will bring fuel into the country this month. Startbex International, a fuel retailer, will be the first customer for UNOC.
In a statement, UNOC said: “We’re negotiating with strategic partners to enhance its customer value prepositions…as it strives to handle favourable friction of fuel imports into Uganda.”
UNOC is not the first national oil company to venture into oil imports. Companies of other countries do it too. Technically, this is referred to as the downstream business operations – marketing and selling of petroleum products.
When Uganda starts producing its oil, UNOC will be in charge of marketing and selling the fuels produced here.
Dr Gorreti Kituttu, the minister of energy and mineral development, said the bulk trading of petroleum as a result of the growing demand for fuel in the country. The country currently consumes six million litres of petroleum products per day.
This venture opens up UNOC to direct competition with private players, including Vivo Energy, the biggest importer and retailer of fuel in Uganda. Also, Total petroleum will be a competitor. It is not yet clear how the margins stand for the company.
The venture also means the company has to pay high premiums for insurance, lease trucks to transport the fuel and also be prepared to deal with legal suits that may appear as a result of direct engagement in the fuel trading business.
Last month, Proscovia Nabbanja, the executive director of UNOC, said the company needs at least 3.1 trillion shillings capitalization in the five years to help it invest and be at playing level with private players.
This means each year, the company should be receiving at least 618 billion shillings.
Aside from the money that the company needs to invest in the sector on behalf of the government, it will also need more for the day-to-day operations to the tune of 80 billion shillings annually. Nabbanja said this is being provided through budget appropriations.