The government and fuel importers are planning major investments in fuel storage facilities as the country seeks to increase its strategic petroleum reserves, amid rising global fuel prices and supply chain disruptions linked to the Middle East conflict.
On Friday, June 5, the Rwanda Utilities Regulatory Authority (RURA) announced a new fuel tariff, under which diesel prices increased by Rwf722 per litre to Rwf2,927, while petrol remained unchanged at Rwf2,938 per litre.
ALSO READ: Transport fares remain unchanged as diesel price increases
That came after the April 17 adjustment, when petrol prices rose from Rwf2,303 to Rwf2,938 per litre, while diesel prices were maintained at Rwf2,205 per litre to support public transport and the movement of goods.
Despite the increase, Prime Minister Justin Nsengiyumva said the government continues to subsidies diesel prices to cushion consumers from the full impact of rising global fuel costs.
"Within that price, there is a government subsidy of 18 per cent," he said.
"This means the actual price we should have announced for diesel per liter is Rwf3,581, but you have seen that we announced a lower price, Rwf2,927."
Import costs surge
Eric Mutaganda, President of the Association of Petroleum Importers (ASSIMPER) and Managing Director of MEREZ Petroleum Ltd, said fuel importers have been heavily affected by the conflict, which disrupted supplies from the Middle East, the region&039;s main source of petroleum products.
"The real prices increased almost fivefold, but fortunately the government stepped in with subsidies to minimise the impact on consumers," Mutaganda said.
ALSO READ: Rwanda moves to triple fuel depot capacity
According to him, the cost of importing petroleum products has risen sharply over the past few months.
"In February, we were paying about $300 per tonne for petroleum products. Today, that cost has reached around $1,650 per tonne," he said.
Mutaganda noted that the surge in prices has significantly increased the capital required by importers to maintain fuel supplies.
"When prices rise five times, you need five times more investment to continue importing the same quantities as before," he explained.
The industry has relied on support from commercial banks and the National Bank of Rwanda to access financing and foreign currency needed to secure imports.
ALSO READ: Rising oil shocks demand a culture of frugality
"We are working closely with banks because we need letters of credit to continue importing fuel. The central bank has also helped in facilitating access to foreign exchange," he said.
Supply disruptions ease
The fuel sector experienced severe supply disruptions between March and April due to congestion and delays at the Port of Dar es Salaam, through which Rwanda receives about 95 per cent of its petroleum imports.
Mutaganda said the disruptions reduced fuel import volumes by between 15 and 20 per cent during the period.
"March and April were particularly difficult because vessels were not arriving on time at Dar es Salaam. However, the situation has now largely returned to normal," he said.
Industry players were also affected by higher freight costs, increased procurement premiums and tighter competition for available fuel supplies across the region.
According to Mutaganda, Tanzania temporarily altered its fuel procurement arrangements, forcing importers to purchase products at higher costs to secure supplies.
Expanding fuel reserves
As Rwanda seeks to strengthen its energy security, fuel importers and government institutions are planning major investments in storage facilities.
Mutaganda said Rwanda currently has about 110 million litres of petroleum reserves, while national plans aim to increase capacity to around 400 million litres.
As part of that effort, MEREZ Petroleum is planning to construct a 20 million litre fuel storage facility in Nyacyonga, in Gasabo District.
"We are waiting for the City of Kigali to issue the necessary certificate so that construction can begin," he said.
He stressed that increasing storage capacity would allow importers to buy larger volumes when prices are favourable and improve the country&039;s ability to withstand supply disruptions.
"Our current commercial storage can hardly exceed one and a half months of stock. That is a risk when there are global supply shocks," he said.
More storage projects planned
Meanwhile, Claudien Habimana, Managing Director of Société Pétrolière (SP) Ltd, said the company is conducting feasibility studies to determine the scale of future storage expansion.
"We are carrying out studies to determine how much additional capacity is needed and the related requirements. The studies are expected to be completed by the end of this year," Habimana said.
The Ministry of Infrastructure is also planning major investments in strategic fuel and liquefied petroleum gas (LPG) reserves.
According to ministry projections, the government plans to allocate Rwf8 billion for fuel reserve facilities in Rusororo and another Rwf2 billion for LPG reserves.
The broader project envisages the establishment of fuel and gas storage facilities with a combined capacity of about 60 million litres in Rusororo Sector, Gasabo District.
The fuel storage component is estimated to cost about Rwf360 billion and is expected to be completed by 2036, while LPG reserve facilities are projected to require Rwf214 billion and be completed by 2047.
Rwanda plans to increase its petroleum reserve capacity from the current 110 million litres, enough for about two months of consumption, to at least 320 million litres within the next two years, according to the Ministry of Trade and Industry.
The expansion is aimed at strengthening energy security and ensuring reserves can sustain the country for up to six months during supply disruptions.