The government of Uganda and its joint venture Alpha MBM Investments signed an implementation agreement worth US$4 billion (about 14.6 trillion) to construct an oil refinery in Hoima District. This will transform Uganda’s oil and gas sector and spur economic growth.
The agreement, which was signed before President Yoweri Kaguta Museveni on Saturday, between the investors from the United Arab Emirates and the Ministry of Energy and Mineral Resources, sets a framework for the investment timelines, plus obligations for the two parties.
Uganda was represented by the Energy Minister Ruth Nankabirwa, Finance Minister Matia Kasaija, Defense and Veterans Affairs Minister Jacob Oboth-Oboth, Lands Minister Judith Nabakooba, Deputy Attorney General Jackson Rwaakafuuzi, among others.
Following the signing of the agreement, the government is now set to start the design, construction and operation of the refinery, which will have the capacity to handle 60,000 barrels per day and the project is estimated to span three years.
The project also covers the construction of a 320-litre Kampala Storage Terminal at Nawabula, Kiringente, in Mpigi District, plus a 212Km finished product pipeline linking the refinery to the storage terminal. It will also include construction of the Mbegu water abstraction facility in Hoima District.
According to the agreement, Alpha MBM Investments, a company under the proprietorship of His Highness Sheikh Mohammed bin Maktoum bin Juma Al Maktoum, a member of the Dubai Royal Family, owns a 60% stake, while the government, through the Uganda National Oil Company (UNOC) and its subsidiary, the Uganda Refinery Holding Company, owns 40% shares.
“Today, I witnessed the signing of a historic oil refinery implementation agreement between Uganda and Alpha MBM Investments LLC, a company based in the UAE. This agreement will see the construction of a crude oil refinery in Hoima District, with a capacity of 60,000 barrels per day,” Museveni posted on social media after the signing of the agreement.
He noted that the oil refinery is not just about fuel but also about Uganda producing and exporting refined products instead of importing them.
Speaking about the project, Energy Minister Nankabirwa said that this marks a historic step in Uganda’s Oil and Gas journey because the refinery will be transformative for the economy, Ugandans and their future.
“The refinery will create thousands of jobs, develop local expertise and serve as a springboard for industries such as petrochemical and fertilizer production,” Nankabirwa said.
“It will also attract Ugandan businesses to participate in the supply of goods and services, plus boosting local enterprise development,” she added, assuring the nation that this project will fully comply with international environmental, health and safety standards.
The Petroleum Authority of Uganda team, led by Mr. Ernest Rubondo, the Executive Director, was hailed for having played a key role in having this agreement concluded to pave the way for its signing.
Taxes and Jobs
Nankabirwa revealed that a study conducted last year indicated that Uganda will collect an estimated Shs7.3 trillion annually from the refinery and Kabalega Industrial Park (KIP).
The government anticipates a fiscal impact of US$804M (Shs2.94 trillion) per annum in taxes from the refinery and US$1.2 billion (Shs4.39 trillion) per annum from the KIP.
The projected taxes from the refinery are contained in a macroeconomic study that was conducted by Stanbic Bank and UNOC, while the estimates from the KIP are part of the economic modelling that was conducted by UNOC.
Economic Benefits
Uganda’s decision to build its oil refinery is expected to have numerous benefits for the country. Some of the key advantages include:
Reduced Dependence on Imports
With its refinery, Uganda will reduce dependence on imported refined petroleum products, saving the country millions of dollars in foreign exchange.
Increased Energy Security
A domestic refinery will ensure a stable supply of petroleum products, reducing the risk of shortages and price volatility.
Job Creation and Economic Growth
The refinery project is expected to create thousands of jobs, both during the construction phase and in the long term, contributing to Uganda’s economic growth.
Improved Trade Balance
By reducing imports and increasing exports of refined products, Uganda’s trade balance is expected to improve, boosting the country’s economy.
Increased Government Revenue
The refinery will generate significant revenue for the government through taxes, royalties, and dividends.
Development of Local Industries
A domestic refinery will provide a reliable source of raw materials for local industries, such as petrochemicals, fertilizers, and plastics.
Enhanced Energy Independence
With its refinery, Uganda will have greater control over its energy sector, enabling the country to make informed decisions about its energy future.
Reduced Environmental Impact
A modern refinery will incorporate environmentally friendly technologies, reducing the environmental impact of Uganda’s energy sector.
Increased Regional Cooperation
The refinery project is expected to foster regional cooperation, as Uganda will be able to supply refined products to neighboring countries.
Improved Energy Access
With a reliable supply of refined products, Uganda will be able to improve energy access for its citizens, promoting economic development and reducing poverty.