Oil Refinery Deal Still Up for Grabs, Says Government

By Ibrahim Kasita

Potential investors interested in the lucrative Uganda Refinery Project will have to wait until September to former express their interest, the energy and mineral development ministry has announced.

The petroleum exploration and production department said in a statement that a US energy investment firm, Taylor DeJongh, was contracted the services of a transaction advisor for the project.

The firm, according to the statement, is supporting the government in sourcing for the lead investor and financing for the refinery, which will be developed on a public-private partnership basis.

“Several investors have expressed interest in developing the refinery and the Ministry plans to put out a request for qualification before the end of September 2013 for potential investors to formerly express interest,” the energy ministry said.

The statement follows an article published yesterday in the Business Vision, which accurately stated that fierce competition for the private player stake in the planned Uganda oil refinery project has erupted.

However, the article insinuated that government had already invited tender bids for the project and that the energy ministry was process of conducting due diligence on them to establish their financial asset base.

Now Uganda has announced that a request for qualification will be put out before the end of September 2013 for potential investors to formerly express interest.

Background

After confirmation commercial oil reserves in 2006, a National Oil and Gas Policy was formulated in 2008 to address the entire spectrum of oil exploration, development, production and valuable utilisation of the country’s oil and gas resources.

Objective 4 of the Policy is to promote valuable utilisation of the country’s oil and gas resources through in-country refining of crude oil.

The Ministry of Energy and Mineral Development later formulated a Refinery Development Programme (RDP) to guide the development of a refinery.

Uganda’s RDP is in line with the East African Regional Refineries Development Strategy that was adopted by the EAC Partner States in 2008 that recommended a second refinery in East Africa be developed in Uganda.

Subsequently, Government contracted a UK energy firm Foster Wheeler Energy Ltd to conduct a feasibility study on building a refinery in Uganda in 2010.

The study considered the crude production potential and also undertook a comparative analysis between building a refinery and a crude export pipeline to the Indian Ocean coast.

It also recommended the size and configuration of the refinery, location, financing options, social and environmental assessment, among others.

The feasibility study recommended that a refinery was a more commercially viable option with a Net Present Value (NPV) of $ 3.2b at a 10% discount rate and an Internal Rate of Return (IRR) of 33%.

Refining Capacity

Government plans to develop a refinery with an input capacity of 60,000 barrels per day in a modular manner, starting with a capacity of 30,000 barrels per day by 2018 which will be increased to 60,000 barrels per day before 2020.

The enactment of the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013 gives a firm legal foundation for this development.

The refinery configuration and complexity determines which products can be produced from the crude oil. The planned refinery will produce Liquefied Petroleum Gas (LPG), diesel, petrol, kerosene, jet fuel and Heavy Fuel Oil (HFO).