An Insight about the Uganda Refinery Project

by Business Times
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The National Oil and Gas Policy for Uganda 2008 recommends refining Uganda’s oil in-country to supply the national and regional petroleum product demand before considering the external market.

Legal Framework

According to the Petroleum Authority of Uganda, 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 after assent by the Presidential. This Act provides for, among others, the legal foundation for the development of a refinery in Uganda and other midstream infrastructures like pipelines and storage facilities.

Following the enactment of the Midstream Act, the Ministry and the other arms of Government put General Licensing, National Content and Health, Safety and Environment (HSE) regulations to operationalise this Act.

Pre-Drilling works  at the King Fisher oil development
Pre-Drilling works at the King Fisher oil development

In addition, the Ministry together with the Uganda National Bureau of Standards (UNBS) through Technical Committee 16 have developed standards and codes for the operation of petroleum infrastructure in the country.

One hundred and ninety-two (192) standards identified as required for both upstream and midstream petroleum operations have been formulated through a consultative process involving both private and public sector institutions, and have been approved by the National Council for Standards.

Feasibility of refining

Regarding the development of a refinery in Uganda, the East African Community (EAC) Refineries Strategy of 2008 recommended, among other things, the development of a second refinery in East Africa to be developed in Uganda. The other refinery is that of Mombasa which has since been shut down.

The Government subsequently contracted Foster Wheeler Energy Limited from the United Kingdom in 2009 to carry out a feasibility study on the development of a refinery in Uganda. This study was undertaken in 2010/2011 and it defined the key aspects of developing a refinery in the country such as the size and configuration of the refinery, its location and financing as well as the market for the petroleum products to be produced from the refinery. The study also confirmed the economic viability of refining petroleum in the country and its recommendations were adopted by the Government in 2011.

Project status

The Government is now taking forward the development of a 60,000 barrel per day refinery at Kabaale in Buseruka Sub-County in Hoima District.

Land Acquisition

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) through a consultative process. The RAP was completed in 2012 and as part of its implementation, payment of compensation to the PAPs who opted for cash commenced in December 2013. By December 2017, 2,625 Project Affected Persons (PAPs) of the 2,670 who opted for cash compensation had been compensated, accounting for 98.3%. The remaining 1.7% includes the PAPs who have never turned up for verification and disclosure. It also includes those whose grievances are still being addressed and some who are in court disputing the compensation rates that were used.

In addition, 533 acres of land were acquired in Kyakabooga Parish, Buseruka Sub-county for resettlement of the PAPs who opted for relocation. Physical planning for this land and construction of resettlement houses and other social amenities for those who opted for relocation was done. The infrastructure includes the construction of 46 resettlement houses, the construction of Nyahaira and Kyapaloni Primary Schools, rehabilitation of Buseruka Primary School, and rehabilitation and expansion of Buseruka and Kabaale health centres IVs. The resettlement houses together with farmland were handed over to the PAPs in 2017.

Selection of a lead investor

The Government conducted a competitive bidding process to identify a lead investor for the refinery project, which was terminated in June 2016. The refinery development project was restructured and expressions of interest were received from about 40 firms. Seven were shortlisted for detailed discussions.

Due diligence was undertaken on four consortia, and two consortia progressed to negotiations on the Project Framework Agreement. The Albertine Graben Refinery Consortium (AGRC) emerged as the selected lead investor.  The project includes the development of a 60,000 barrels of oil per day (bopd) refinery in Kabaale, Hoima District and a 211-kilometre multi-products pipeline from Kabaale to a distribution hub in Namwambula, Mpigi District.

The Project Framework Agreement (PFA) for the project was signed on April 10, 2018. After several engagements, AGRC’s US$17 million Pre-FID Performance Bond was issued and confirmed by the Government of Uganda (GoU) on September 7, 2018. The PFA thus became effective, and the Pre-FID activities such as the FEED, ESIA and Geo-technical studies for the refinery development commenced in September 2018.

The refinery project will be a private sector-led project, with Government’s share held by the Uganda National Oil Company, through its subsidiary Uganda Refinery Holding Company. East African Community partner states (Kenya and Rwanda) and Total E&P Uganda have expressed interest in holding shares. The project will be funded through a debt-to-equity ratio of about 70:30. The Lead Investor will be responsible for raising the debt for the project.

The Uganda Refinery project, which includes the development of a 211-kilometre petroleum products pipeline from Hoima to North West of Kampala, is estimated at US$ 3 – 4 billion.

Kabaale (Hoima) Industrial Park

The development of a Master plan for the development of the industrial park which will have an international airport, refinery, crude oil and products storage, transmission hub, logistics warehousing, offices, Petrochemical industries and associated facilities among others, was completed in 2018. The Master Plan will provide for the development of utilities, infrastructure and common services. The industrial park will be located in Kabaale, Hoima district.

Business Times Uganda

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