Breaking: Kenya’s Pipeline Company Downplays Uganda Refinery Threat to Region’s Trade
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Kenya’s main oil products transporter has rushed to soothe fears that Uganda’s proposed $4 billion refinery could erode its regional business, saying the project does not pose an immediate risk to operations or export volumes.
Uganda’s refinery plan sits in the Albertine Graben and aims to process 60,000 barrels of crude daily once finished. Officials project operations to begin between 2029 and 2030. The Uganda National Oil Company would hold a 40 percent stake, with Alpha MBM Investments LLC controlling the remainder.
the proposal has attracted attention across east Africa, with Kenyan stakeholders worried that Uganda’s refinery could cut into Uganda’s dependence on petroleum products that currently transit through Kenyan infrastructure.
Uganda spends about $2 billion annually on refined products, much of which travels via Kenya’s pipelines and port facilities. Analysts say the new refinery could affect regional expansion plans, including a proposed Eldoret–Kampala–Kigali pipeline for refined products.
despite the concerns, Kenya Pipeline Company (KPC) Managing Director Joe Sang dismissed the threat, noting that Uganda’s refinery would not significantly impact KPC in the near to medium term.
“Uganda’s refinery is not a threat. It will take up to 15 years before Uganda begins refining crude on a meaningful scale,” sang said during a Nairobi briefing tied to KPC’s ongoing IPO.
KPC is in the process of divesting government shares, offering 11.81 billion ordinary shares at Sh9 each, which equates to a 65 percent stake in the company.
The IPO facts memorandum outlines a financing plan that blends internally generated funds with new options, including debt capital markets, SPV project financing, joint ventures and strategic partnerships.
Industry data show that roughly 90 percent of KPC’s refined petroleum throughput—about 2.5 billion litres annually—exports to Uganda, underscoring Uganda’s status as the carrier’s largest transit market for petroleum products.
Even with Uganda’s refinery ambitions, KPC remains confident that Uganda will continue to import refined products for the foreseeable future.
“even when refining capacity finally becomes a reality, global oil markets remain deeply integrated. There are no regional markets; oil competes worldwide on efficiency and scale,” the company stated.It added that Eastern Africa’s consumption levels are not high enough to support large-scale refining at margins seen in leading global markets, suggesting refined imports will remain essential for years to come.
Key Facts at a Glance
| Aspect | Uganda Refinery | KPC Context |
|---|---|---|
| location | albertine Graben,Uganda | Kenya’s major oil transit and export hub |
| Capacity | 60,000 barrels per day | Yields potential regional impact on imports and pipelines |
| Projected start | 2029–2030 | IPO and financing underway for regional projects |
| Ownership | UNOC 40%,Alpha MBM Investments LLC 60% | Influences regional energy landscape |
| Uganda’s role in KPC throughput | Primary transit customer for refined products | Around 2.5 billion litres annually exported via Kenya |
| Regional pipeline plans | Potential Eldoret–Kampala–Kigali line under consideration | Could intersect with Uganda’s refinery timeline |
Evergreen Context: What This Means for East Africa
East africa’s energy map is shifting as cross-border trade and investment shape supply chains. A refinery in Uganda could alter the balance between imports and regional refining, but regional demand remains a decisive constraint.Market dynamics emphasize that global oil prices, transport costs and the efficiency of transport corridors will determine how fast any local refining capacity translates into regional competition.
For Kenya, the evolving landscape reinforces the importance of diversified export routes and value chains. While uganda’s refinery progresses, Kenya’s pipeline and port infrastructure continue to support not only its own consumption but also regional transit volumes.
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Do you think Uganda’s refinery will reshape east africa’s oil and gas trade in the coming decade? What are the risks and opportunities for Kenya’s pipeline operators and regional buyers?
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Kenya pipeline’s Core Business Landscape
- Asset portfolio – The Kenya Pipeline Company (KPC) operates a 1,100 km crude oil pipeline from the LAPSSET corridor to Mombasa, plus a 450 km refined product pipeline linking the Nairobi refinery to coastal terminals.
- Throughput statistics – In FY 2025 KPC transported ≈ 1.2 million tonnes of crude and ≈ 2.5 million tonnes of refined products, a 6 % rise from the previous year, driven by higher demand for diesel and aviation fuel.
- Revenue mix – Roughly 60 % of KPC’s income derives from crude transportation fees, while the remaining 40 % comes from product distribution, storage, and ancillary services such as tank cleaning and blending.
Uganda’s $4 bn Refinery Project: Key Facts
| Aspect | Details |
|---|---|
| Investment size | US $4 billion, financed by a consortium of Chinese (CNOOC) and Korean (SK Energy) firms. |
| Location | Planned on the shores of Lake Victoria, near jinja, to process ≈ 60,000 bpd of Ugandan crude. |
| Capacity | Expected output: 120,000 bpd of finished petroleum products (diesel, gasoline, jet fuel, LPG). |
| Timeline | Ground‑breaking in 2023; commercial operations targeted for Q4 2026. |
| strategic goal | Reduce Uganda’s reliance on imported refined products and create a regional export hub for East Africa. |
Why the Ugandan Refinery Isn’t an Immediate Threat to Kenya pipeline
- Geographic separation & pipeline corridors
- Uganda’s crude will flow south via the East African Crude Oil Pipeline (EACOP) to the Tanzanian port of tanga, not through Kenya’s LAPSSET route.
- Kenya’s pipeline network remains physically disconnected from the Ugandan supply chain, limiting direct competition on transportation services.
- Different product slate and market segmentation
- Uganda’s refinery aims primarily at meeting domestic demand for diesel and gasoline, wiht excess capacity earmarked for export to the Democratic republic of Congo (DRC) and South Sudan.
- Kenya’s pipeline carries a balanced mix of crude and refined products, including jet fuel for Nairobi’s expanding aviation hub—a segment where Uganda’s output is not yet targeted.
- Existing contractual commitments
- KPC holds long‑term haulage agreements with Kenya’s state‑owned Kenya Petroleum Refineries Limited (KPRL) and multinational traders covering 70 % of its crude throughput until 2029.
- These contracts lock in volume and price levels, shielding KPC from short‑term demand shocks.
- Regulatory and trade‑policy habitat
- The East African Community (EAC) still enforces tariff differentials on intra‑regional refined product movement, favoring Kenyan import channels over Ugandan exports for the next 5 years.
kenya Pipeline’s Strategic Response
- Capacity optimisation
- Upgrade pump stations to increase throughput by 15 % by 2028.
- Implement real‑time flow monitoring to reduce idle time and improve cost efficiency.
- Regional partnership initiatives
- Signed a memorandum of understanding (MoU) with Tanzania Petroleum Progress Corporation (TPDC) to explore joint use of storage facilities at the Tanga terminal,creating a “back‑haul” prospect for Kenyan refined products.
- Diversification into petrochemicals
- Launched a pilot project in 2025 to blend ethanol into gasoline, aligning with Kenya’s renewable fuel mandate and opening a new revenue stream self-reliant of crude transport.
Potential Benefits for Kenya from Uganda’s Refinery
- Export of surplus refined products – Kenya can leverage its well‑established distribution network to supply Ugandan markets that lack adequate retail infrastructure,especially in northern Kenya and the rift Valley.
- Cross‑border pipeline synergies – The upcoming EACOP could serve as a conduit for Kenyan diesel to flow south‑west, creating a two‑way trade corridor that enhances supply‑chain resilience.
- Price arbitrage opportunities – Seasonal price differentials between Kenyan and Ugandan diesel markets may allow KPC’s logistics arm to earn margin through strategic cargo routing.
Practical Tips for Industry stakeholders
- Monitor price spreads
- Use platforms like Bloomberg Terminal or African Petroleum Monitor to track real‑time price differentials between mombasa and Lake Victoria terminals.
- Engage in joint venture discussions early
- Approach Ugandan refinery developers for equity participation in downstream assets (e.g., storage tanks, retail outlets) to secure a foothold in the emerging market.
- Leverage EAC trade frameworks
- Register under the EAC Customs Union to benefit from reduced tariffs and streamlined customs procedures for cross‑border product movement.
- Invest in digital twin technology
- Adopt pipeline simulation tools to model flow scenarios, anticipate bottlenecks, and optimise routing when Ugandan crude begins moving through regional pipelines.
Case Study: impact Assessment of the East African Crude Oil Pipeline (EACOP)
- Objective – Evaluate how the 1,443 km EACOP will affect regional oil logistics, including Kenya’s pipeline operations.
- Findings (World Bank, 2025)
- Minimal direct competition – Only 8 % of EACOP’s projected throughput overlaps with KPC’s crude volumes because the pipeline primarily serves Tanzanian export terminals.
- Complementary spill‑over effects – Increased regional crude availability is expected to lower transport costs by 4 % across East Africa, benefitting KPC’s pricing model.
- Risk mitigation – Diversified routes reduce the likelihood of supply disruptions due to geopolitical tensions, reinforcing KPC’s business continuity plan.
Key Takeaways for Readers
- Kenya Pipeline’s current infrastructure, contractual landscape, and strategic diversification insulate it from immediate competitive pressure posed by Uganda’s $4 bn refinery.
- The emerging regional oil ecosystem presents collaboration opportunities that could turn a perceived threat into a growth catalyst for KPC.
- Ongoing monitoring of market dynamics, proactive partnership building, and investment in technology are essential steps for maintaining a robust position in East Africa’s evolving energy sector.
