Uganda woos new development partners for oil refinery

Uganda is continuing development work on an oil refinery despite the exit of a major consortium in June, and is in discussions with partners from Africa, the Middle East and China, according to a senior executive at the government regulator.

According to Ali Ssekatawa, director for legal and corporate affairs at the Petroleum Authority of Uganda, the Uganda National Oil Company has stepped in to continue development work while the government looks for a strategic partner. He expects the next steps to be announced within the next three months.

“There’s a lot of appetite and interest in developing the refinery,” he tells African Business.

He confirms reports that discussions have taken place with Algerian state-owned company Sonatrach and says that talks have also been opened with various interested parties from Africa, the Middle East and China.

“The preferred option is the Uganda National Oil Company working together with another national oil company to take forward this project,” says Ssekatawa, though he adds that Uganda is ready to consider proposals from other entities.

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Doubts over 2027 deadline

The latest blow to the project came at the end of June, when the Albertine Graben Refinery Consortium (AGRC) failed to meet a deadline for a final investment decision, having been unable to line up financing for the $4.5bn project. As such, AGRC has lost its rights to develop the refinery, with the Ugandan government forced to go back to the drawing board.

Ssekatawa points out that although AGRC ultimately failed to reach a final investment decision, it did reach several significant milestones. Any new strategic partner will not have to start from scratch. Front-end engineering and design work and environmental impact assessments have already been completed, while most of the land needed for the refinery and associated pipelines has been acquired and cleared, he says.

Still, the aim of commissioning the refinery in 2027 seems ambitious, given that Uganda still needs to find a construction contractor and put financing in place. Ssekatwa acknowledges “a little bit of uncertainty,” but says that the Ugandan government will not reduce the planned size of the refinery and continues to believe a ribbon-cutting can take place in four years’ time.

“Based on the milestones achieved, despite the expiry of this contract [with AGRC], we think that we are still on course for that timeline.”

The long road to a refinery

Almost 20 years have passed since oil was first discovered in commercial quantities in Uganda’s Lake Albert region. Progress in bringing these resources into production has been slow, although drilling is now underway to allow oil to begin flowing from 2025.

While most of the oil will be exported via a controversial pipeline running through Tanzania, the Ugandan government has long been determined to refine a portion of its oil domestically.

The need to import petroleum products is a major drain on the country’s foreign exchange reserves, especially at a time of rising global prices. The Bank of Uganda reported that the fuel import bill doubled in the 2022 fiscal year.

However, efforts to construct a 60,000 barrels-per-day facility near the town of Hoima have endured repeated setbacks. A Russian consortium was selected as the preferred bidder to construct the refinery in 2015, but the deal broke down the following year. The AGRC consortium, which included US and Italian firms, was then handed the contract in 2018.