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Terminate Hared’s fuel reserves contract, MPs tell govt

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PARLIAMENT | Legislators have called on government to terminate the contract of Hared Petroleum Ltd for the management of fuel reserves, accusing the company of failing to execute its obligations as per the contract.

The details of Parliament’s recommendations are contained in the report by the Public Accounts Committee (PAC) following audits conducted by the Auditor General for FY2014/2015 on the Ministry of Energy and Minerals.

The report was presented to Parliament by Angelline Osegge, the PAC chairperson, on Tuesday.

“Given the national strategic importance of this facility, and considering the failure by the operator, the government should repossess the management and operation of the facility,” Osegge said.

In 2012, the government and Hared Petroleum entered into a concessional agreement to refurbish, restock maintain and manage the petroleum strategic reserve facility in Jinja.

According to the agreement, the operator was required to manage the facility for a period of 10 years, with Hared Petroleum committing to build the government reserves within six months from the signature date.

However, an investigation by the auditors exposed the loopholes within the contract, revealing that despite the concession agreement requiring Hared Petroleum to ensure that 40% (12 million litres) of the storage capacity of petroleum is available at all times as a strategic reserve — which is released whenever there is a national supply shortfall — this isn’t the case.

In his report to Parliament, Auditor General John Muwanga noted that at the time of inspection in September 2O15, there was only 274,000 litres of petrol and 331,000 litres of diesel in stock, an indication that the tanks had never had the 40% strategic reserves at any one time.

“From the above analysis, it is evident that stock build up is not being achieved and consequently the national petroleum reserves are not serving the purpose for which they were established,” the audit report reads in part.

However, when the Energy Ministry was tasked to explain why the contractor had never fulfilled this obligation, the officials argued that Hared Petroleum’s ability had been constrained by unforeseen increased level of investment in the refurbishment that doubled and the challenges associated with the supply route of Mombasa management also pursuing the option of capitalising the strategic reserve.

PAC also expressed concerns over the big disparity between the amount of petrol and diesel in stock, saying that it is an indication that Hared Petroleum had failed to fulfill the contractual obligations.

In 2007, Uganda was hit hardest when political instability in Kenya affecting transportation of goods and services to the country, leading to soaring fuel prices, among other services.

The government also faced similar challenges years later, which put pressure on authorities to refurbish the national fuel reserve in Jinja and make the most of its use.

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