Uganda signs deal to enable refinery and pipeline construction

Uganda can now kick start the building of a refinery after the government and three oil companies that have struck oil in the country signed a memorandum of understanding at State house Entebbe.

The MOU sets up Uganda as a future oil producer and places the necessary checks by laying a route to market framework.

The MOU also details the commercial framework of the building of a crude export pipeline from the Lake Albert Basin to the Kenyan coast as well as a right sized petroleum refinery to satisfy the national and regional demand.

The refinery that will start at a capacity of 30,000 barrels a day is upgradable to 60,000 barrels should future growth necessitate the same.

By signing the MOU the 3 companies also promised to start works towards its implementation as soon as possible with the players identifying the project requirements and the coordination and timing of activities to enable the integrated development of the fields.

“The MOU requires government to provide support to the oil companies in acquiring approvals for studies and surveys for an export pipeline and to initiate discussions with neighbouring countries in relation to cross-border frameworks for the pipeline,” Energy Minister Irene Muloni said.

The pipeline via Kenya will be essential to the oil sector in the country as the oil production will exceed the demand with the surplus output.

The pipeline and refinery construction will be the greatest business investment in Uganda as well as the entire East Africa.

“During this phase, Tullow will seek to conclude all necessary Field Development Plan and Production License approvals with the government. Tullow will also complete important concept, engineering, cost and environmental studies. We will also work with the government on land access, environmental approvals, the development of key roads to support project construction work, and financial discussions leading to a Final Investment Decision in an estimated 2 years,” said Jimmy Mugerwa general manager of Tullow oil Uganda.

The company has invested US$2.8 billion in Uganda oil industry with 69 wells drilled in Buliisa and Hoima districts and has a success rate of 84 percent.

The government has said it is reviewing 8 applications for production licenses for Exploration Area 2 operated by Tullow Oil Uganda.