Govt in tight deadline for oil refinery investment decision

Uganda is expected to produce first oil in 2025 with the refinery expected to have started working by 2027. Photo / File 

What you need to know:

  • Government says it is doing everything possible to see that the negotiations for the refinery final investment decision are closed by end of June 

Government is racing against time with only a month left to complete protracted negotiations, and ink the final investment decision (FID) that will set pace for the construction of the oil refinery. 

Mr Peter Muliisa, the Uganda National Oil Company (UNOC) legal and corporate affairs officer, told Monitor Saturday that government is finalising negotiations with the Albertine Graben Energy Consortium (AGEC). 

“We are doing everything possible to close by end of June,” he said, noting that negotiations are ongoing to clear commercial agreements such as the crude supply agreement. 

Energy Minister Ruth Nankabirwa, while speaking at the East Africa Petroleum Conference indicated that the target is to complete the investment decision before close of June, and kickoff refinery operations latest in 2027. 

UNOC holds Uganda’s refinery interests at 40 percent through Uganda Refinery Holding Company, while AGEC holds 60 percent private shareholding.  AGEC is comprised of Nuovo Pignone and Saipem Spa from Italy and YAATRA and Lionworks from Mauritius.  

The final investment decision will be a confirmation by all investors of their commitment under a shareholders’ agreement.  

In 2018, former US Ambassador Deborah Malac and Mr Museveni witnessed the signing of the project framework agreement between government and AGEC as private sector investors to finance, develop and operate the refinery estimated to cost of $4b (Shs15 trillion).

The refinery complex set in Kabalega Industrial Park in Hoima District will process over 60,000 barrels of waxy crude oil per day to serve petroleum needs of East Africa and export to global markets.  

The refinery remains close to Mr Museveni’s heart, who has on several occasions advocated for a refinery to process crude oil and its attendant benefits of petro-chemical products for industrial and domestic use. 

The pipeline’s transportation tariff for crude will cost $12.7 (Shs48,958) per barrel from Kabalega Industrial Park to the Port of Tanga in Tanzania, which according to President Museveni, is expensive. Mr Muliisa said the award of major engineering, procurement and construction contracts will follow once the investment decision is signed. 

An Algerian delegation that met Mr Museveni early this month expressed interest in providing capacity building, sharing of information, and benchmarking during the development of the refinery. 

Energy Ministry permanent secretary Irene Batebe, said the full value of contracts will be fully disclosed after the final investment decision takes place. 

In March, officials from Energy Ministry and Petroleum Authority took a trip to Dangote refinery in Nigeria with the view of benchmarking on best refinery practices. 

The Dangote refinery is the largest single-train refinery in the world with a processing capacity of 650,000 of oil per day. 

Dr Michael Mugerwa, the Uganda Refinery Holdings general manager, said the Residue Fluid Catalytic Cracker, a configuration used by the Dangote refinery, shall be replicated in Uganda to process liquefied petroleum gas, premium and regular gasoline, jet fuel, diesel, and low-sulphur fuel oil. 

The lesson

Ms Batebe said the key takeaway from the Dangote refinery was the ability to mobilise finances internally from within Nigeria.  

The Shs15 trillion ($4b) refinery has a current 70 to 30 percent debt to equity ratio.