The Ugandan government recently took a significant step towards commercializing its oil and gas sector by signing an implementation agreement with Alpha MBM Investments, a Dubai-based company, to construct a USD$4 billion (about Shs1.4 trillion) oil refinery.
The production sharing agreement indicates that Uganda owns 40% of the refinery through the Uganda National Oil Company (UNOC), while Alpha MBM Investments owns 60% shares.
This project, according to Forest Masaba, the Corporate Affairs officer at the Petroleum Authority of Uganda (PAU), marks a major milestone in Uganda’s oil industry, paving the way for the development, design, financing, construction, operation, and maintenance of a 60,000-barrel-per-day oil refinery in Hoima District.
Key Features of the Refinery Project
According to Masaba, the main features of the refinery, which is expected to be completed within 3 to 4 years, shall include;
Infrastructure Development
A 211km-long multi-product pipeline that will transport refined petroleum products from Hoima to Namwambula, Mpigi, passing through Hoima, Kikuube, Kyankwanzi, Kiboga, Wakiso, and Mpigi.
Storage and Distribution
Masaba explains that the Uganda National Oil Company (UNOC) will manage the storage and distribution terminal in Namwambula, serving downstream oil marketing and distribution companies.
Efficient Fuel Distribution
To achieve sustainable production, Masaba says that the pipeline and terminal infrastructure will ensure efficient fuel distribution across Uganda, supporting the country’s energy needs and economic growth.
Impact on Uganda’s Economy
The oil refinery project is expected to have a significant impact on Uganda’s economy, according to Masaba, including:
Increased Revenue: The project will generate substantial revenue for the government through taxes and royalties.
Job Creation: The refinery will create employment opportunities for Ugandans, both directly and indirectly.
Economic Growth: The project will contribute to Uganda’s economic growth by reducing dependence on imported petroleum products and enhancing energy security.
Petrochemical Industry
According to Masaba, the refinery project shall boost the petrochemical industry in Uganda since crude oil products like petrol, diesel, kerosene, and other products will be produced locally. Masaba adds that besides the above, the production of agrochemicals and pharmaceutical products will also be enabled in Uganda, which will in turn impact the economy positively.
Water Abstraction Point
Masaba also explains that to operate the refinery sustainably and to align it with Uganda’s ecological system, a water abstraction point shall be constructed in Hoima so that the communities around it can benefit from it, while at the same time mitigating the effects on the environment.
Uganda’s Oil and Gas Potential
Uganda has significant oil and gas reserves, estimated at 6.5 billion barrels of oil in place, with recoverable resources estimated at 1.4 billion barrels. The country aims to produce 230,000 barrels of oil per day, with the oil and gas sector expected to drive economic growth and development.
Oil Production Timeline: First oil is expected to be produced by 2027, with production expected to last 25-30 years.
Gas Reserves: Uganda has estimated gas reserves of 0.5 trillion cubic feet, which can be used for power generation, industrial purposes, and domestic consumption.
Challenges and Opportunities
While the oil refinery project presents numerous opportunities for Uganda’s economic growth, it also poses environmental and social challenges.
The government and project developers must ensure that the project is implemented sustainably and responsibly, minimizing its environmental footprint and maximizing benefits for local communities.
Overall, the oil refinery project has the potential to transform Uganda’s energy sector, driving economic growth and improving the country’s energy security.
With careful planning and implementation, Uganda can harness its oil and gas resources to achieve sustainable development and prosperity, instead of exporting crude oil and earning way less compared to other countries that have profitable oil and gas industries.