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As first oil nears, goal of refinery unchanged

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Leaders in Acholi sub-region tour an oil rig in Nwoya District in 2013. Uganda dreams big with its refinery plans, aiming to add value to its 1.4 billion barrels of recoverable oil reserves. PHOTO | FILE

Uganda dreams big with its refinery plans, aiming to add value to its 1.4 billion barrels of recoverable oil reserves while safeguarding energy security.

Consumption trends suggest the move isn’t just ambition—it’s necessity. With daily white product demand at seven million litres and projected to grow eight to 12 percent annually, according to the Energy ministry data, it gives a reason to think that the country needs a local supply to match.

The original pitch in the 2010s was a modest 30,000 barrels-per-day refinery, but by 2030, Uganda envisions a 60,000-barrel facility to meet a projected eight-million-litre daily appetite. But does it really add up? The government hasn’t fully laid out the case, though officials like Dr Michael Nkambo Mugerwa, head of the Uganda Refinery Holding Company, offer insights.

For starters, Uganda’s landlocked geography is a logistical headache. Importing petroleum from the Middle East or India racks up costs, with overland transport stretching 1,200–1,400 kilometres.
"The cost of fuel at the pump reflects these transportation hurdles,’’ Mr Mugerwa notes, adding that Uganda’s crude oil will be locally discounted compared to Indian Ocean benchmarks like that from Tanga.

Africa’s energy woes are starkly illustrated by the sheer distances fuel shipments travel—from Mombasa to the Central African Republic. For Uganda, this highlights the urgency of its refinery project, which carries both strategic and economic significance for the region. Then there’s the regional angle. Uganda’s refinery isn’t just about local supply—it’s about positioning itself as a petrochemical hub for neighbours like Tanzania, South Sudan, Rwanda, and the Democratic Republic of Congo.

High stakes

Dr Mugerwa outlines the stakes: Macro-economic studies with partners like Sandvik Bank estimate a gross domestic product (GDP) boost of $8.5–10 billion annually—roughly 20 to 25 percent of Uganda’s current economy.

“First of all, it's important to note that our refinery’s production won’t entirely meet Uganda’s demand. Since we’re using an RFCC (Residue Fluid Catalytic Cracking) refinery, it’s more likely to produce a higher volume of gasoline than diesel. We're expecting to produce about 30 to 40 percent more gasoline than Uganda's needs, which we’ll likely export to neighbouring markets like Eastern DRC or Southern Sudan, and potentially even to coastal regions. The exact feasibility will depend on the refinery gate economics,” said Mr Mugerwa.

“For diesel, we estimate about 70 percent of Uganda’s current demand will be met. However, we’ll still be importing some diesel to meet the country's needs. As for liquefied petroleum gas (LPG), we anticipate producing a significant surplus. Currently, Uganda consumes about 35 to 40 tonnes per day, which is quite small compared to countries like Kenya or Tanzania, where daily consumption ranges from 600 to 800 tonnes,” he added.
Uganda aims to balance meeting both local and regional demand for its products. For example, it expects to produce fuel oil, which it could potentially sell to the eastern DRC for the mining sector, or to northern Tanzania for the gold mining sector. However, there’s also the option to convert some of this fuel oil into petrochemicals, which the Uganda Refinery Holding Company is actively exploring.

African market

With the refinery anchoring Kabalega Industrial Park, Uganda envisions crude import substitution worth $600 million and downstream expansions into petrochemicals, fertilisers, and LPG. Yet a question looms: why build a refinery when demand for petroleum fuels is declining elsewhere? China is shutting down its refineries, Europe’s appetite for liquid fuels is shrinking, and North America’s projections follow suit.
The answer lies in Africa, Mr Mugerwa says, adding that unlike other regions, Africa’s demand for transportation fuels is set to rise significantly, making the refinery not just relevant but essential for meeting future energy needs.

A plethora of international energy studies show that as 2050 approaches, demand for fuels is set to rise across parts of Asia (excluding China), Africa and Latin America.
"Sure, you might see the occasional electric vehicle on Kampala’s streets, but they’re rare, with limited range and nowhere to charge once they leave the city,” says Dr Mugerwa.
The Energy ministry forecasts Uganda's demand for fuel to double by 2035 and triple by 2040, justifying plans to expand the refinery’s capacity from 60,000 to 180,000 barrels per day.

Bottlenecks

Financing, however, has been a hurdle. Since 2018, global capital markets have been hesitant about oil and gas, pushing Uganda toward a public-sector-led strategy.

With the government committing 40 percent equity and UAE partners covering 60 percent, the refinery is now moving forward without project financing.
Mega-projects need robust infrastructure, and Uganda has stepped up. From the nearly completed Kabalega International Airport (€360 million) to $1 billion invested in 850km of critical oil roads, the groundwork is in place.

Inside the industrial park, a $120 million investment will pave 86km of roads, bolstering logistics and laying the foundation for a thriving oil economy by 2025. The Kabalega Industrial Park (KIP) is set to power Uganda’s industrial transformation, hosting a 240MW high-voltage substation. Of this, 80-100MW will serve the upstream oil sector and EACOP, while the rest powers KIP’s infrastructure.

Beyond heavy industries, KIP will feature light and medium industries, including agro-processing, supported by industrial gases like nitrogen and carbon dioxide. Dr Mugerwa emphasised Uganda’s commitment to avoiding the "Dutch disease"—the neglect of other economic sectors in favour of oil and gas.
By integrating agro-processing and leveraging stakeholder collaborations across NGOs, CSOs, and private sectors, Uganda aims to foster socio-economic transformation.

“Look at the Dangote refinery’s impact on Europe—refineries shutting down there means jobs shifting here to Africa,” Dr Mugerwa noted. “Uganda plans to be self-sufficient and contribute to this global economic shift.”
With refinery negotiations nearing completion, Uganda is on track to process 60,000 barrels daily from Tilenga and Kingfisher projects by 2029, anchoring its industrial and energy ambitions.

Financing

But who will foot the bill for this facility because it’s not yet been established. Mr Mugerwa, clearly not in the mood to spill all the beans, kept things vague about the details, saying, “I can’t say much right now, but I can assure you we’re starting fresh with a completely new design.”
All the work with the previous private sector developer? Gone. The Uganda Refinery Holding Company is now focusing on a new approach using Universal Oil Products (UOP) technology, which is like the gold standard for refineries worldwide.

In December 2024, Uganda’s cabinet decided to flip the script on its $4 billion oil refinery. Instead of looking to international financial markets for project finance, the government and its new partner, Alpha MBM Investments LLC, are taking the equity route. Ms Ruth Nankabirwa, the Energy minister, confirmed that the UAE-based Alpha MBM Group would foot the bill over three years. Not bad for a fresh start, right?
But let’s rewind to 2018: Uganda signed a deal with the Albertine Graben Refinery Consortium (AGEC), made up of American and Italian firms, to finance and develop the refinery. Fast forward to 2023, and the deal expired without hitting any of the major project milestones.

The Energy Ministry wasn’t shy about it, saying AGE didn’t meet the big ones—like getting lenders to commit to 100 percent of the required debt (you know, that thing that makes the whole project possible), not to mention skipping over the environmental and social impact assessment, lump-sum turnkey price, and commercial viability assessment.

In short, AGE didn’t deliver, and the government wasn’t having it. Cue the plot twist: after ditching private developers, the government decided to go with a public-private combo. Enter Alpha MBM. But here’s the kicker— the Uganda National Oil Company (UNOC) had already made moves, signing deals in March 2023 with Sonatrach, Algeria’s state-owned oil and gas giant. It seemed like a signal that Sonatrach was set to step in. But plot twist: it didn’t.

So why the sudden pivot to Alpha MBM, a Dubai-based investment outfit led by Sheikh Mohammed bin Maktoum bin Juma Al Maktoum (yes, a member of the Dubai royal family)? Your guess is right. The government’s lips are sealed.
Insiders are whispering that the refinery still hasn’t locked in the funds—unless the government can work its magic and prove them wrong. But until that happens, the refinery is stuck juggling the twin challenges of finding cash and figuring out how to turn a profit from day one of operations.