Overview of Uganda’s 60,000 Barrel Refinery Project

The refinery project is the child of the National Oil and Gas Policy (2008) for Uganda (objective 4) which seeks to promote valuable utilisation of the country’s oil and gas resources through in-country refining of crude oil.

The project is guided by the a Refinery Development Programme (RDP) formulated by the Ministry of Energy and Mineral Development and is in line with the East African Regional Refineries Development Strategy, adopted by the EAC Partner States in 2008.

Foster Wheeler Energy Limited Ltd from the United Kingdom was contracted to conduct a feasibility study on building a refinery in Uganda in 2010/2011 recommending that the development of 60,000 barrels per day refinery was commercially viable with a Net Present Value (NPV) of US$ 3.2 billion at a 10% discount rate and an Internal Rate of Return (IRR) of 33%.

Foster Wheeler Energy Limited Ltd also recommended the size and configuration of the refinery, location, financing options, social and environmental assessment, among others.

The current plan is the development of a refinery in a modular manner, with the first phase in place by 2018.

The enactment of the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013 gives a firm legal foundation for this development together with other related infrastructure. The planned refinery will produce Liquefied Petroleum Gas (LPG), diesel, petrol, kerosene, jet fuel and Heavy Fuel Oil (HFO).

The favored location is the Kabaale Parish in Buseruka Sub County, Hoima district due to its centrality in relation to the entire Albertine Graben, proximity to the oil fields, sparse population and relatively low laying terrain among others.

The Ministry is in the process of acquiring 29 sq.km of land for the refinery. This land will host staff quarters, a health facility, an International Airport, waste management facilities and petrochemical industries among others.

A Resettlement Action Plan (RAP) to guide acquisition of the required land was undertaken during 2012 and the valuation report was approved by the Chief Government Valuer in December 2012.

Uganda contracted the services US energy investments firm as the Transaction Advisor (TA), TaylorDeJongh who will support Government in sourcing for the lead investor and financing for the refinery, which will be developed on a Public Private Partnership basis.

Six firms/ consortia were short-listed and received the Request for Proposals for a Lead Investor/Operator during January 2014 following a Request for Qualification  with Russia’s RT Global resources emerging as the preferred bidder while SK Engineering and Construction being the alternate bidder.

Some EAC Partner States (Kenya and Rwanda) have also expressed interest in owning shares in Uganda’s refinery.

Benefits

The refinery in Uganda the second in East Africa will boost the region’s refining capacity and ensure security of supply of petroleum products especially for the land locked Partner States such as Rwanda and Burundi. The EAC  has a total demand of approx. 200,000 barrels a day, Uganda 20,000 barrels which is arising by 7% each year.

The construction of the refinery alone is estimated to create 4,000 to 6,000 temporary jobs.

Once complete, ongoing refinery operations are expected to create more than 650 permanent jobs as well as the development of attendant industries such as the petrochemical and manufacturing industries and ensure the transfer of technology in the refining and associated industries.

Other benefits include contribution to the country’s growing energy requirements by providing Heavy Fuel Oils (HFO) which can be used for power generation and Liquefied Petroleum Gas (LPG) that will help offset use of trees for domestic cooking.