Uganda Oil | Uganda soon to become an oil economy as Saipem receives permission to start refinery design tender

Uganda has increased its ventures into the Oil sector after permitting Italian-based firm, Saipem, to start studies in the technical front-end engineering design (FEED) of the refinery project.The directive was given by the Albertine Graben Refinery Consortium (AGRC),a scheme responsible for the design, finance, construct and maintainance of the proposed oil refinery in Hoima District.

The FEED study that is expected to last for about 17 months will cover a total sum of Shs250b ($68m) and mainly concern the technical aspects of the proposed refinery. There is however possibilities of an extension for the engineering, procurement, and construction (EPC) phase.

In April 2018, the government signed a project framework agreement with AGRC giving the latter the power to design, finance, construct and maintain Uganda’s oil refinery which will produce 60,000 barrels per day.

Italian firm given nod refinery design tender

Uganda oil refinery stage: PHOTO ERONIE KAMUKAMA

According to the agreement details, the technical work stream includes; the configuration, market, logistics and technical FEED, and financial work stream which includes the equity finance, equity, in-kind equity, cash, pre-finance, debt finance, lenders and the debt structure, which will lead to Final Investment Decision (FID).

The project agreement also details the legal workstream which includes, among others, crude oil supply agreement with the upstream oil companies—France’s Total E&P and China’s Cnooc, refined products supply sales agreement, Engineering Procurement and Construction (EPC), operation and maintenance, and a shareholders agreement.

Uganda’s stake in the refinery will be carried through the Uganda Refinery Holding Company (URHC), a subsidiary of Uganda National Oil Company (UNOC), which is mandated to manage the country’s commercial interests in the oil sector.

The UNOC chief legal and corporate affairs officer,Mr Peter Muliisa, told Daily Monitor that AGRC “indicated from the beginning” that Saipem would handle the FEED work of the project.

Uganda adopted a Public Private Partnership arrangement in the financing of the refinery which left the country with 19% stake into the oil, AGRC has 60 per cent stake, and UHRC taking 40 percent.

Kenya and Tanzania had also offered to buy a 2.5 per cent and Tanzania 8 per cent stakes and Total E&P offered to buy a 10 per cent stake.

In 2010 government hired Foster-Wheeler, a British engineering firm, to study the viability and feasibility of the refinery. The Foster-Wheeler report posited that the refinery is an economically viable investment with a net present value of $3.2b at a 10 per cent discount rate and an Internal Rate of Return of 33 per cent, despite opposition by oil companies and analysts.

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