Uganda’s neighbours agree to participate in refinery project

27th September 2013 By: John Muchira - Creamer Media Correspondent

The planned construction of a controversial refinery in Uganda has received a crucial boost after neighbouring countries were incorporated into the project.

Barely a month after the authorities in Uganda coerced foreign firms operating in the country’s nascent oil industry to invest in the project, which also includes an export pipeline, other East African nations have agreed to take stakes in the project.

Uganda Minister of State for Energy Simon D’Ujanga recently said a new share- holding structure has been agreed to in terms of which private investors will own 60% of the facility, while East African Community member States, which include Uganda, Rwanda, Kenya, Tanzania and Burundi, will own the remaining 40%.

“We have agreed the refinery will be an East African facility because it is intended to serve the region,” D’Ujanga said on the sidelines of the East African Power Industry Convention, in Nairobi, Kenya.

He added that a meeting of heads of State is slated for Kigali, Rwanda, later this month to ratify the shareholding structure.

Apart from Tullow Oil, Total and CNOOC, which already have a stake in the project, Uganda plans to attract investors into the project, with a price tag of $2-billion, from countries with experience in building oil refinery facilities.

D’Ujanga also revealed the Ugandan government had started compensating communities living on the 29 km2 piece of land in Hoima, in western Uganda, where the facility is to be built.

The unveiling of the new shareholding structure of the facility came days after Uganda had reached a truce with foreign firms opposed to the construction of a refinery, arguing it would not be viable and it would take years for them to recoup their investments.

The foreign firms persuaded the Uganda government to scale the project down to 30 000 bbl/d. Initially, Uganda planned to invest in a medium-size refinery with a capacity of 60 000 bbl/d, which would be expanded to a maximum of 180 000 bbl/d in the future.

The agreement with the foreign firms and the incorporation of neighbouring nations into the project brings to an end seven years of sharp differences on how to exploit Uganda’s oil resource, believed to be in the region of 3.5-billion barrels.