Uganda Refinery Implementation Agreement Signed
An implementation Agreement (IA) for the Uganda Refinery has been signed, laying a foundation for the project, which is crucial for the commercialisation of Uganda’s oil and gas resources.
President Yoweri Kaguta Museveni oversaw the signing of the IA between the Ministry of Energy and Mineral Development (MEMD), Uganda National Oil Company (UNOC) and the) and Alpha MBM Investments LLC, joint venture partner. The signing ceremony was at the State House in Entebbe.
The signatories were the Minister of Energy and Mineral Development, Hon. Ruth Nankabirwa, UNOC CEO, Proscovia Nabbanja and Chairman Alpha MBM Investments LLC, Sheik Mohammed bin Maktoum Al Juma Maktoum.
The IA sets a framework for the project including assurance of the Uganda Government’s support and parties’ roles and responsibilities. It will facilitate the finalisation of the design, construction and operationalisation of the refinery.
With a 60,000 barrels per day capacity, the Uganda Refinery is one arm of the two-pronged commercialisation plan of Uganda’s oil and gas resources. The other is the East African Crude Oil Pipeline (EACOP). On production, the refinery has the “first right of call” (given priority), according to the key oil agreements.
UNOC (40%) and Alpha MBM Investments LLC (60%) are the shareholders in the $4bn project to be located at the Kabalega Industrial Park (KIP) in Homa. Construction is expected to span three years.
The demand for refined petroleum products in Uganda is currently about 7 million liters per day. This has grown at a rate of 9% over the 10 years (save the slight dip in 2020 due to COVID-19) and is expected to continue growing especially with the intensification of Uganda’s oil and gas projects. Demand analysts forecast a similar growth trend for the region including Kenya, Tanzania, Rwanda, Eastern DRC, Burundi, and South Sudan.
Uganda imports petroleum products costing about $2bn annually. A refinery, therefore, ensures security of supply and will help mitigate sudden price hikes due to supply-related speculation.
According to a macro-economic study by Stanbic Bank in consultation with the Uganda National Oil Company (UNOC), the refinery will add $3.3 billion to Uganda’s gross domestic product per annum and $8.2bn per annum to the national capital formation. It will also improve Uganda’s balance of payments by $591m, according to the study. Regarding jobs, 32,000 will be created. Of these, 1,200 are direct, 16,900 indirect and 13,900 induced.
In terms of protecting the environment, the refinery will produce 658 metric tonnes of LPG per day, which will reduce the widespread reliance on charcoal and firewood.
President Museveni stressed that the project is in accordance with the country’s value addition agenda.
“The oil refinery is not just about fuel; it is about Uganda producing and exporting refined products instead of importing. We must stop exporting raw materials and instead add value to everything we produce,” he said.
Sheik Mohammed bin Maktoum Al Juma Maktoum reiterated his commitment to the project, saying “thriving communities” was the goal.
According to Hon. Ruth Nankabirwa, the project would lead to economic transformation.
“The projects will create thousands of jobs, develop local expertise, and serve as a springboard for industries for such as petrochemical and fertilizer production. It will also attract Ugandan businesses to participate in the supply of goods and services, and boost local enterprise development,” she said.
At UNOC, the signing of the IA created excitement as it one of the company’s key projects managed by the Uganda Refinery Holding Company, a subsidiary. END