EXCLUSIVE: Uganda’s $3bn Oil Refinery Looking ‘Financially Attractive’ to Investors

The government of Uganda does not expect investors to face any challenges in raising billions of dollars for the construction of the proposed oil refinery in Hoima District, saying the project is “extremely attractive” and tenable.

Government and the Albertine Graben Refinery Consortium (AGRC) in April signed the Project Framework to guarantee development, design, financing, construction, operation and maintenance of the oil refinery.

This process is expected to be completed in the course of financial year 2017/2018 and thereafter, its Front End Engineering Design (FEED) will be undertaken by the Private Investors.

FEED enables investors to make sound investment decisions and execute projects with minimal technical, cost and schedule risks.

The refinery is expected to be financed under the public-private partnership ratio of 60:40 but investors will pick Uganda’s bill and recoup their funds once the venture starts making profits.

The General Manager of Uganda Refinery Holdings Company (URHC), Dr Michael Nkambo Mugerwa said, “Right now the prospects of raising equity look very good,” adding, “Financially, the refinery is an extremely attractive project.”

Mugerwa, who has since been tasked with leading the structuring and development of the first refinery in Uganda, further told ChimpReports during a tour of the oil fields organized by Petroleum Authority Uganda (PAU) that basing on preliminary findings, “we are seeing a lot of interest in the equity markets.”

The chemical Engineer with over 20 years experience in oil refining industry, further stated: “We have also seen a lot of interest from export credit agencies, development financing institutions as well as the World Bank to support and also provide guarantees or say insurance for the project.”


The AGRC comprises YAATRA Africa (Mauritius), Lionworks Group Limited (Mauritius), Nuovo Pignone International SRL (a General Electric Company located in Italy) and SAIPEM SPA (Italy).

Uganda is represented in the consortium by the Uganda National Oil Company (UNOC), which is a limited liability petroleum company owned by the government.

Under the agreement, AGRC will be responsible for funding the pre-FID activities and will also proceed to construct and operate the refinery.

The refinery, which will be developed as a commercial undertaking with focus on the regional market, will supply products like kerosene, petrol, diesel, heavy fuel oils, among others.

Mugerwa said “So far the prospects of funding this refinery are looking very good and it might actually be oversubscribed. This means there are more people interested.”

Government of Uganda will take a 40 percent stake in the refinery.

“We will probably end up being the largest shareholders,” said Mugerwa.

Raising funds for such huge projects is always tough for developing countries like Uganda.

2020 deadline

While government maintains the first oil will be running by 2020, this will depend on how fast the much needed infrastructure such as roads, pipeline and airport will be put in place.

Mugerwa, who previously managed Engineering Procurement and Construction aspects of large capital refining projects for TECHNIP (USA), a leading EPC contractor for the oil and Petrochemical Industries, said “construction of the refinery will follow closely as soon the first oil is out.”

He said the refinery project is a very costly venture which requires confidence among investors.

“The refinery is expected to cost about $3bn. You can’t expect an investor to put $3bn down unless he is assured as reasonable as possible that there is crude oil available. So there is need to develop the upstream areas,” said Mugerwa.

“The joint venture partners of CNOOC, Total E & P and Tullow are hoping to achieve their Final Investment Decision (FID) for upstream i.e – kingfisher, Buliisa as well as the export pipelines,” he added.

Museveni in a group photo with government officials and representatives of the oil consortium at Entebbe recently

“They want to do that in the next 6 months. So once they have done that and start construction, they assure the investor that they will have a supply of crude oil.”

Upstream activities include identifying oil and natural gas deposits and extraction of these resources from underground.

Conclusion of this process paves way for downstream operations which including refineries that turn crude oil into usable products such as gasoline, fuel oils, and petroleum-based products.

Price of oil

Prices of oil have been volatile thanks to swings in oil supply; a situation that has raised concern about the viability of Uganda’s oil.

However, in April 2018, global oil prices averaged $72/b from below $50/b in March 2017.

Mugerwa, who boasts vast experience in process engineering, project controls, risk management and oil refinery technologies, explained the pricing of the crude that enters the refinery is not what the world price is.

“It’s the world market price less the cost of getting it to the market,” said Mugerwa, adding, “So you have to deduct the cost of transport from Tanga to say Singapore. You have to deduct the cost of getting the crude oil through the pipeline to the coast which is somewhere around 12- 13 per barrel.”

He, however, said Uganda will reap more from investing in the refinery.

Mugerwa said petroleum products which enter the country are some of the “most expensive petro products” in the world because of transport.

“Most of them come by trucks. You can imagine; it is extremely expensive. If you look at the economics of the refinery, there will be some benefits for the country in the sense that we will be cutting some of the transport costs. But essentially, the refinery will be a very popular venture.”

Uganda’s oil imports (kerosene, petrol, diesel, aviation fuel) bill stands at over $1bn annually.

This cost will be offset by a new refinery with a refining capacity of 60,000 barrels per day, relying on crude oil from within.

Officials say with reduced oil imports, Uganda will realise a better balance of payment position and a strengthened currency.

The refinery project will be implemented by a Special Purpose Company, the Refinery Company, that will be incorporated by the private investors and the Uganda Refinery Holding Company, which is a subsidiary of the Uganda National Oil Company.

Uganda is estimated to have 6.5 billion barrels of oil deposits with an estimate of 1.4-1.7 billion barrels recoverable.

UNOC boss, Dr Josephine Wapakhabulo recently said the development of the refinery would “trigger a number of other investments in the energy-based industries, contributing to economic development and attainment of middle income status.

The refinery is also expected to unlock other planned investments at the Kabaale Industrial Park.

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