Overview:
Uganda's US4B oil refinery deal with Alpha MBM is finalized. Officials say the project will save the country US1B annually on fuel imports.
Uganda has made significant strides in securing equity funding for its oil refinery project, a development the Bank of Uganda (BOU) estimates will save the country more than annually on petroleum imports.
The projected annual saving will be achieved by directly meeting the country’s growing fuel needs, which will boost energy security, improve the balance of payments, and create thousands of jobs, according to the BOU.
Deal Secured with Alpha MBM Investments
On March 29, the Government of Uganda signed an implementation agreement with Alpha MBM Investments to serve as the lead investor for the crude oil refinery.
Eng. Irene Batebe, permanent secretary of the Ministry of Energy and Mineral Development, said the project will be fully funded by equity, replacing a previous debt-heavy arrangement with the Albertine Graben Energy Consortium.
“This new deal establishes Alpha MBM Investments as the lead investor with a 60% stake, while the Uganda National Oil Company (UNOC) holds 40%,” Batebe said in a recent interview.
The project is intended to reduce reliance on imported fuel, create jobs, and position Uganda as a regional refining hub by adding value to its oil resources. The cost includes the 60,000-barrel-per-day refinery, a pipeline, storage terminals, and related infrastructure.
Value Addition and Infrastructure
President Yoweri Museveni, a strong proponent of refining crude oil in-country instead of exporting it raw, called the deal a “game-changer” for Uganda’s economy. He stressed his government’s commitment to ensuring the country benefits from its natural resources and warned officials against frustrating investors with bureaucratic delays.
The refinery project components include;
A 60,000-barrel-per-day refinery complex in Kabaale, Hoima.
A modern storage terminal in Namwabula, Mpigi district, to ensure adequate fuel reserves.
A 212-kilometer multi-product pipeline linking the refinery to the storage terminal.
The Mbegu water abstraction facility to support refinery operations.
Economic and Regional Benefits
Experts have labeled the refinery as key to the nation’s economic transformation.
“It will boost energy security, serve as a catalyst for local industrial growth in petrochemicals, fertilizers, and plastics, plus generate substantial government revenue through taxes and dividends,” said Julius Kapwepwe, a member of the East African Budget Network.
The refinery, which will be private sector-led with UNOC managing the government’s share, is also expected to support regional supply. Kenya and Rwanda, along with TotalEnergies Exploration and Production Uganda, have expressed interest in holding shares.
Charles Ocici, director general of Enterprise Uganda, said the project is crucial for economic and macroeconomic stability, noting that petroleum products have a significant positive impact on the geo-economic trajectory of nations in the Great Lakes region.
Once operational, crude oil from the Tilenga and Kingfisher oil fields will be pumped to the refinery, which has the right of first call. The remaining crude will be sent into the East African Crude Oil Pipeline (EACOP) for export from Tanga, Tanzania.
Legal Framework and Land Acquisition
The 2008 National Oil and Gas Policy recommended refining discovered oil in-country before considering exports. This led to the enactment of the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013, which provides the legal foundation for the refinery and other midstream infrastructure.
Land acquisition for the refinery commenced in 2012. The government acquired a resettlement action plan for the 2,670 project-affected persons (PAPs), who were given the option of cash compensation or physical resettlement. Houses and land titles for 72 PAPs who opted for resettlement were handed over in Kyakaboga, Hoima district, in May 2022.