40 firms interested in Uganda's refinery
May 28, 2013
Over 40 firms have expressed interest in the construction and operation of a proposed $3.2b refinery project, the acting minister of energy and mineral development disclosed yesterday.
By Ibrahim Kasita
Over 40 firms have expressed interest in the construction and operation of a proposed $3.2b refinery project, the acting minister of energy and mineral development disclosed yesterday.
Peter Lokeris said his ministry is now evaluating firms to establish their technical competence and their financial strength before a decision to award the contract is made.
“We are a landlocked country and we need a refinery to address our petroleum supply problems. We need a power plant that will use our crude oil to support the rural electrification project,” he said.
“More than 40 companies are interested in this project and we are now conducting due diligence on them to establish their financial asset base (to complete the project on time).”
The minister was speaking to the media prior to the launch of the first Uganda mining, oil and gas conference and exhibition 2013 due to take place from 29-30th May at Kampala Serena Hotel.
The event is expected to bring together participants who will contribute to the future mining and energy business in Uganda.
With a commercially-established petroleum resource asset base of about four billion barrels in reserves, Uganda is determined to deliver natural gas as the initial feedstock to supply a 50 megawatt dual power station to increase electricity supply.
In addition to gas, heavy fuel oil from extended well tests will be used for the power station. This is also aimed at increasing capacity and life of the power station to three decades.
Then the refinery is expected to process major oil white produces like kerosene, aviation fuel, and diesel to meet local energy demand. There are also other by-products from oil that can be used in building roads and in making products like plastics and jellies.
President Yoweri Museveni has assented to the petroleum laws that govern the construction of the refinery and associated infrastructure like pipelines, storage facilities and crude oil value addition.
“We shall have a modular refinery starting with 30,000 barrels of oil per day (bopd) but upgrade the refinery to 60,000 bopd because the current recovery reserves can support this capacity,” Lokeris said yesterday.
The minister revealed that although the oil companies preferred to export all the crude to international markets “to get their money quickly,” they agreed on increasing the capacity step by step as new oil discoveries are made.
“We have agreed we shall develop the refinery in a holistic manner recommending that the pipelines interconnecting the oil wells and the refinery and the power plant connect to the export route pipeline too,” he disclosed.
“The small (30,000 bopd) will come first as we are still negotiating for the best export route pipeline.”
Tullow and partners had originally stuck on constructing a 1,300km pipeline from Lake Albert region all the way to Mombasa port where Uganda’s crude oil would be destined to international markets.
However, the minister revealed that the international oil firms are considering a new northern route – building a pipeline to Lira then connect Moroto to North Western Kenya where some oil discoveries were made recently.
This is in anticipation of tapping into the proposed oil pipeline from Juba to Lamu port in Kenya.
Recent feasibility studies for the development of refinery in Uganda confirmed it is economically feasible and beneficial to first build a refinery compared to constructing an export route pipeline.
The Net Present Value for a Ugandan refinery project to process 60,000 barrels of oil per day at an initial investment of $3.2b has post tax rate of 33%, making the project an investment priority.