Fuelling Uganda’s future: Refining the way

Every Sunday, I have the privilege of discussing Uganda’s oil and gas industry on Discourse Africa, a Twitter Spaces platform, with experts in the subject.

Recently, I had a noteworthy discussion with Dr Michael Nkambo Mugerwa, the general manager of Uganda Refinery Holding Company Limited, a subsidiary of Uganda National Oil Company.

With more than 30 years of experience in the global oil and gas sector, Dr Mugerwa brings a wealth of knowledge to the topic of refinery development in Uganda.

It is vital to emphasise the importance of refining Uganda’s energy resources, as a refinery holds immense significance for our country. It represents a transformative opportunity to harness the potential of its natural resources and drive economic growth.

The Ugandan refinery aims to add value to our crude oil by producing diesel, petrol, jet fuel, heavy fuel oils, and liquefied petroleum gas. This local processing of crude oil creates job opportunities and fosters a skilled workforce. It also promotes technology transfer and knowledge-sharing, empowering Uganda’s human capital.

Moreover, a refinery contributes to energy security by reducing reliance on imported fuels, stabilising prices, and ensuring a steady supply for domestic consumption. Every year, Uganda spends nearly a billion dollars importing petroleum products.

These products are transported into the country through extensive supply chains involving large fuel tankers covering long distances. Such reliance on imported fuels imposes significant environmental, social, and economic costs on our nation.

Currently, fuel is brought to the port at Mombasa by ships and then transported to Uganda in heavy tankers across Lake Victoria.

This complex supply chain not only increases the cost of fuel but also poses environmental risks. By having our own refinery, we can significantly reduce our dependence on these extensive transportation networks.

We can also make substantial savings in foreign exchange. These saved funds can be redirected to crucial sectors and, thereby improve the lives of our citizens. In addition to the economic benefits, a refinery in Uganda will contribute to environmental conservation.

The current transportation process involving ships and tankers emits significant pollution. Furthermore, a refinery can act as a catalyst for industrialisation. It will generate petroleum by-products like plastics and fertilisers, stimulating the growth of related industries and fostering a diversifi ed economy.

The establishment of supporting infrastructure and industrial parks around the refinery strengthens our local supply chain and attracts investments. Not to mention, a refinery enhances Uganda’s bargaining power in global markets.

To facilitate this, a 200km pipeline will be constructed, connecting Hoima to Buloba, where the refi ned products will be stored and distributed from the Buloba Storage facility. Beyond refining oil, the vision extends to the establishment of the Kabalega Industrial Park in Hoima.

This petrochemical-based hub aims to generate valuable petroleum by-products, while the upcoming Kabaale International Airport, nearing completion, will also be located within the industrial park.

This integrated approach seeks to maximise the benefits derived from Uganda’s petroleum resources. Despite the ambition and innovation demonstrated by these projects, concerns have been raised about Uganda’s capacity to deliver the refinery, primarily due to apprehensions regarding project costs.

The recent announcement of the Dangote Refi nery in Nigeria, for example, led to comparisons being drawn between the two projects. During a recent online debate, a Twitter user asked Mr Ali Ssekatawa, the director of legal of the Petroleum Authority of Uganda, about the perceived expense of our refinery.

He addressed this concern by highlighting several factors contributing to the cost disparity between the two projects. One key factor is the location of Uganda’s refinery which is situated 1,300km inland from the coast, which poses significant logistical challenges that could potentially increase costs.

He explained other factors such as economies of scale, location, project scope, access to crude oil sources, technological complexity, the maturity of the respective oil industries, and ongoing cost analysis. I wholeheartedly agree with Mr Ssekatawa and Dr Mugerwa’s insights.  

The writer is an advocate and partner at Kampala Associated Advocates [email protected]