The government is in crucial and final Negotiations
with its Joint Venture Partner from the United Arab Emirates-UAE to formalize and
sign the Final investment decision for the Oil Refinery to be established in
Kabaale, in Hoima district.
The government plans to develop 60,000 barrels of
oil per day refinery at Kabaale village, Kabaale parish in Kabaale Sub-County in Hoima District.
The refinery project is part of the efforts by the
government to build a petrochemical industry from Uganda’s oil and gas
resources. The refinery will produce refined petroleum products in the country.
The Uganda Refinery Project also involves a 211-kilometer
multi-products pipeline from Kabaale to a distribution hub in Namwambula -Mpigi
District, a refined product storage terminal in Namwabula – Mpigi, and a raw
water pipeline from the Lake Albert to the refinery in Kabaale.
In January, the Ministry of Energy commenced negotiations with Alpha MBM Investments; an investment firm from the United
Arab Emirates (UAE) to build the oil refinery project.
The new partner came in after Albertine Graben Energy
Consortium (AGEC) dropped out of the deal in which it was to build and operate
the Greenfield Oil Refinery estimated to cost US$ 4 billion (15.2 Trillion).
Sarah Banage, the head of corporate affairs at the Uganda
National Oil Company (UNOC) told Uganda Radio Network (URN) in an interview
that, the government is currently undertaking a number of negotiations with their
joint venture partner from the UAE to prepare both the government and the joint
venture partner to be ready to sign the crucial Final Investment Decision-FID
for the refinery soon.
According to Banage, before the FID is announced, several other crucial
agreements have to be signed.
She states that, the negotiations with the joint venture
partner are fruitful and that soonest, the Final Investment Decision-FID for
the Refinery will be made.
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Banage says the government and the joint venture partner are
currently making key commercial agreements with Alpha MBM Investments for the
Refinery before the Final Investment Decision-FID for the Oil Refinery is
undertaken. This she says could take one to two weeks.
Banage explains that some of the crucial agreements to be
signed before the FID is announced include the Crude Suppliers Agreement
intended to put the needed feedstock of 60,000 barrels of crude oil per day
needed for the refinery, the takers Agreement or Product Sales Agreement which
is intended to demonstrate that there are buyers of the finished products and
the shareholder's agreement among others.
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The Front-End Engineering Design (FEED) for the Refinery
Project was completed by (AGEC), the then Lead Investors in August 2021, and
subsequently approved by the Petroleum Authority of Uganda (PAU) in July 2022.
However, the government on 29th June 2023
resolved not to extend the Project Framework Agreement (PFA) as had been
requested by Albertine Graben Energy Consortium (AGEC). The PFA thus
expired on 30th June 2023, and the Government is reconsidering how best the project
should be taken forward.
The final refinery configuration study was completed and
approved by the government in 2019.
The study was to determine the final
refinery as a Residue Fluid Catalytic Cracker (RFCC) type of refinery. Details
of the new configuration remain secret between the government and the new
investor.
The Refinery project will be a private sector-led project,
with the Government’s share held by the Uganda National Oil Company, through its
subsidiary Uganda Refinery Holding Company.
The refinery project is planned to have a debt-to-equity
ratio of 60: 40 respectively, implying that 60% of funding to the oil refinery
will be a debt whereas 40% will be equity.
These will also include the Host Government Agreement and
the Offtakers Agreement.
If established, the refinery is expected to address
Uganda’s problem with fuel supply, with current import routes from Kenyan and
Tanzanian ports having suffered several disruptions.
The government hopes that the refinery will stimulate the
birth of a petrochemical industry, which could produce a cheaper source of
other products such as fertilizers and plastics.
The National Oil and Gas Policy for Uganda 2008 recommends
refining the discovered oil in-country to supply the national and regional
petroleum product demand before consideration of exportation.
To facilitate the achievement of this policy objective, the
Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013
was enacted by Parliament in February 2013, and became effective in
July 2013 following Presidential assent.
This Act provides for among others, the legal foundation
for the development of a Refinery in Uganda, and other Midstream infrastructure
like pipelines and storage facilities.
Following the enactment of the Midstream Act, the Ministry of
Energy, and Mineral Development together with the other arms of Government put
in place general Licensing, National Content, and Health, Safety and
Environment (HSE) regulations to operationalise the Act.
The acquisition of the land required for the Refinery
commenced in 2012 with the preparation of a Resettlement Action Plan (RAP) for
Project Affected Persons (PAPs) and was successfully concluded.
Overall, 2,670 people were
affected by the Project. The PAPs were either given cash compensation or
resettled to a nearby location acquired by the Government.
The Government constructed houses for seventy-two (72) PAPs
who opted for physical resettlement.
The land titles for the houses and
farmland were handed over to seventy-two (72) PAPs in Kyakaboga village in Buseruka sub-county in Hoima
District as part of the RAP implementation for the refinery project on 19th May
2022.
