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Why fuel reserves are important
Demand for petroleum products in Uganda is growing at 5% per annum, according to Friday.
He said large scale storage facilities increased security of petroleum supply while also reducing the cost of storage per unit volume.
He cited Uganda’s land-locked counterparts – Rwanda which is pursuing an ambitious target of more than doubling strategic storage capacity to an equivalent of four months, up from the current 1.5 months; Zambia is also planning to scale up fuel reserves.
Uganda also continues to explore medium to long term plans for the development of pipelines (and the attendant storage facilities) which will link the petroleum supply markets in the region.
“As government, we will commercially evaluate these plans with the view to promoting their development,” he said.
Currently, Uganda consumes about 5.4 million litres of fuel per day, (which amounts to 162 million litres per month), according to the Ministry of Energy. Its installed storage capacity is about 104 million litres, of which 30 million litres (29%) capacity is at JST. The other 71% is constituted by various small capacity storage facilities.
It is not clear how much fuel stock private companies have. But with JST reserving just above 12 million litres on regular basis, which is equivalent to two days consumption and far less than 162 million litres monthly consumption in addition to anticipated growth in demand, it means a lot more has to be invested in storage to sufficiently cushion the country from abrupt supply disruptions.
It also signals that private players stock over 160 million litres of fuel to meet the monthly demand. It also means consumers are still exposed to price hikes in times of speculation, hoarding and other shocks.
Role of private players
Government requires private players to hold at least 10 days stock at service stations in relation to their market share.
According to the Ministry of Energy, Uganda has 208 licensed petroleum product distributors, which control 71% of storage reserves.
In an interview with The Independent, the Managing Director for Total Uganda Limited, one of the largest fuel retailers in Uganda, Florentin de Loppinot said as a land-locked country, Uganda remained exposed to low regional fuel availability which made continuity of supply a challenge.
“Total respects the laws of Uganda and meets the 10 day reserve obligation on a national level,” de Loppinot said.
He said Total was continuously investing not only to adapt but anticipate market changes.
“This means offering to our customers in Uganda energy-efficient fuels and guaranteeing them constant fuel availability,” he said.
Total has 127 service stations across the country plus 27 Gapco stations which it acquired in March this year. With the purchase of Gapco in Uganda, Tanzania and Kenya, de Lappinot said the company more than doubled its fuel storage capacity in East Africa.
Going forward, he said local crude oil production, reduced fuel consumption initiatives and larger fuel storage capacities would help sustain Uganda’s development.
He said Total supported government’s planned new oil terminal project in Buloba, Mpigi district, which he said will triple national storage capacity, thus avail more fuel and prevent supply shortages until the planned Hoima refinery is up and running.
Gilbert Assi, the managing director of Vivo Energy Uganda Limited told The Independent that private fuel companies were in discussions with government to see what role they could play in building the new national 60,000 cubes of storage facility in Buloba.
Assi said the company was investing heavily in storage facilities to ensure that supply remained stable, and recently increased storage capacity to more than 16 days stock – 17 million litres– with reserves located in Kampala and Mbale.
“We have a very good appetite for investment in this country because we believe there are so many opportunities,” he said, adding that government needs to give investment incentives to allow the private sector to invest more in storage facilities. Vivo has 132 fuel stations across the country.
Peter Businge, the managing director of Oryx Uganda Limited told The Independent that the anticipated expansion of the economy in the coming years meant investments in storage facilities by government and the private sector was a must.
