No immediate solutions to the current energy crisis
Seen only through the prism of the current energy crisis, the Russian foreign minister’s recent visit did not produce anything fungible, at least in the short term, as Robert Madoi writes in this explainer.
Will the Russian Foreign Minister’s visit have an impact on the oil shock Uganda is grappling with?
It was inevitable that some attention would be devoted to the tons of oil from Russia that were to remain unsold after the invasion of Ukraine resulted in an oil embargo. The volume of Russian oil exports by sea has not cratered despite – or indeed because of – the tightening of Western sanctions against Moscow. Preliminary data from Kpler, a shipment analytics firm, indicates crude exports shipped from Russia averaged nearly 3.88 million barrels per day (bpd) last month. This represents a startling growth of over a million bpd from pre-war levels. Trade flows from June 1 to 15 – according to Kpler – place the main destinations for Russian maritime crude oil exports in China and India. Other key importers were Turkey, Poland, the Netherlands and Italy. During last week’s visit to Uganda, Mr. Sergey Lavrov, the Russian Foreign Minister, said: “We sell oil to any country that is interested in it…if a country wants it, they don’t want it. there’s no impediment to that, whether it’s India, China, or any country. African state.
So why isn’t Uganda positioning itself to get cheap Russian fuel?
Despite sharp price increases, recent datasets from Kpler and the International Energy Agency indicate that Africa is not importing crude oil and condensate exports from Russia. Most African imports come from the Middle East, thanks to the Gulf which offers a much cheaper shipping route. Since 2011, Uganda has received the vast majority of its petroleum products via road from Kenya using the open tender system. The capacity sharing ratio for public transit has been reduced this year to 55:45 from 60:45. An oil and gas industry expert told Saturday Monitor that while “private oil companies buy oil from anywhere” under the open bidding system, the black gold “most likely comes from the Gulf and India”. Discounted Russian fuel – with a discount of around $30 (around Shs 116,000) a barrel – is not enough, the expert added, due to the distance between the East African coast and Russia. Moreover, the expert further revealed, “Oil would have to be refined, which increases the cost [at the pump].”
Does this mean Uganda has completely ruled out buying cheap Russian crude?
Not entirely. Dr Joseph Muvawala, executive director of the National Planning Authority (NPA), has outlined a plan to address cost overruns that have plagued consumers in the forecourts of late. Dr Muvawala believes the recent blow can be significantly cushioned if crude oil is imported from producing countries and ‘refined in Mombasa’. The refinery in Kenya has, however, faced strong headwinds, changing ownership twice in the past six years. While the Kenya Pipeline Company-controlled refinery has a crude storage capacity of 230 litres, it has been in stasis since 2013.
So were the bilateral talks aware of the fact that energy solutions are essential?
At first glance, yes. Lavrov spoke of a venture in which Russia and Uganda are “seeking new areas for new modes of energy cooperation [sector].” While the Russian foreign minister’s comment was nuanced, his country recently touted nuclear technology as a plausible antidote to Africa’s chronic energy poverty. The footprint of Rosatom, a Russian state-owned company specializing in nuclear energy, has gradually expanded in Africa. The company has a working agreement with the Ugandan government. President Museveni recently said that plans to build Uganda’s first-ever atomic power station have been set in motion. There are 19 steps to take, with pre-feasibility studies on nuclear power programs already ticked off. Since then, emphasis has been placed on the creation of specialized nuclear institutions.