Government of Uganda plans to develop a 60,000 barrels of oil per day refinery at Kabaale, Buseruka Sub-County in Hoima District. The Uganda Refinery Project includes:
- the refinery to be located at Kabaale in Hoima,
- a 211 km long multi-products pipeline that will evacuate refined products from the refinery to a storage terminal at Namwabula, Mpigi District
- the Mbegu Water Intake and its corresponding water pipeline and,
- the storage terminal itself, for the refinery products located at Namwabula in Mpigi District.
Alpha MBM Investments, an investment firm from the United Arab Emirates (UAE) is now the lead partner in the oil refinery project.
The entity, which is led by His Highness Sheikh Mohammed bin Maktoum bin Juma Al Maktoum, a member of the Dubai Royal Family, will partner with the Uganda National Oil Company (UNOC) to develop the refinery.
The development works expected to commence this year, will see Uganda earn at least US$4b (about sh15.2trillion) in investment, on top of the ongoing oil related works.
The new investor was announced by Hon. Dr. Ruth Nankabirwa, the Minister for Energy and Mineral Development.
According to the Minister, following the expiry of the Project Framework Agreement with the previous partners in June 2023, several entities expressed interest. Alpha MBM emerged the best after thorough evaluation.
A Memorandum of Understanding was signed on December 22, 2023, between the government and Alpha MBM Investments LLC, outlining cooperation and negotiation terms for the Refinery Project,” she said.
On January 16, 2024, negotiations of the key commercial agreements with Alpha MBM Investments commenced and that they are expected to be concluded within three months.
Once concluded, development works under the refinery project will commence.
In 2019, the final refinery configuration study was completed and approved by the government. The study was to determine the final refinery as a Residue Fluid Catalytic Cracker (RFCC) type of refinery.
In 2021, the Front-End Engineering Design (FEED) for the refinery was concluded and later approved by Cabinet.
The FEED was also approved by the Petroleum Authority of Uganda (PAU), the sector regulator.
The commercial agreements
At least three commercial agreements are expected to be signed under the refinery project before the Final Investment Decision (FID) is undertaken.
These include the Host Government Agreement, Crude Supplier’s Agreement, and the Shareholders’ Agreement.
However, there will also be an Offtakers Agreement which can be concluded later.
The Host Government Agreement, like that of the crude oil pipeline, will be signed between the government and the refinery company, set to be created.
The agreement lays out commitments and obligations of each part such as security and land ownership for the Government of Uganda side, and the issues related to National Content and Health Safety and Environment (HSE) by the refinery company.
The Crude Suppliers Agreement is intended to put the needed feedstock of 60,000 barrels of crude oil per day needed for the refinery. It will be signed between the crude oil owners and the refinery company.
The crude oil owners are the Government of Uganda and UNOC, TotalEnergies E&P Uganda and China National Offshore Oil Corporation (CNOOC) Uganda Limited.
The Shareholders’ Agreement will be signed by shareholders of the refinery company.
The Uganda Refinery Holding Company, a subsidiary of the UNOC will hold a participating interest of up to 40% in the Refinery Company on behalf of UNOC and Government of Uganda.
The shareholders’ agreement lays out the financial obligations of each part such as cash calls, defaults, and stipulates the voting rights.
The Offtakers Agreement or Product Sales Agreement is intended to demonstrate that there are buyers of the finished products.
The decision to have the Offtakers Agreement will be determined by potential lenders and financiers. The refinery project is planned to have a debt-to-equity ratio of 60: 40 respectively, implying that that 60% funding to the oil refinery will be a debt whereas 40% will be equity.