Uganda once again taken a step to restore its interest to have a domestic oil refinery making it part of the overall plan inflate the benefits from the gas and oil industry
The new players being UAE-led consortium associated with His Highness Sheikh Mohammed bin Maktoum bin Juma Al Maktoum, a member of the Dubai royal family. The firm known, as Alpha MBM, is an investment vehicle, part of the MBM family of investments listed also as private interest of the Royal Family.
Alpha MBM is in consortium for the refinery project with two companies with extensive oil and gas experience. They are SKA Energy, a sub-division of the SKA International Group, an Iraq-based operator. SKA’s business is in construction, fuel supply and logistics as well as refining and petrochemicals.
While Alpha MBM will be the primary source of investment capital, it is SKA’s construction and oil marketing experience that will form the commercial block of the consortium. Lastly is SPEC energy, a fairly well-known oil and gas integrated firm with a presence in the Middle East.
SPEC for the Uganda refinery project is presenting its operated refinery projects at four locations (Slemani, Iraq, Al Barham in Kirkuk, San Company refinery in Rajaf and Kyber refinery in Pakistan as well as other projects).
Presently, the refinery consortium is in expedited negotiations with the government of Uganda. The negotiations are time-sensitive because crude production is set to begin next year and project work on the East African Crude oil pipeline (EACOP) is further ahead. The EACOP company is finalizing its financing with its primary lenders which is expected to be concluded by May 2024.
The Uganda National Oil Company (UNOC) and the ministry of Energy intend to bring the refinery agreements firmly into place around the same time. To this end, the senior agreements for the refinery, namely an Implementation Agreement and a Crude Supply Agreement, are being negotiated.
This is a departure from the previous project-based approach where the government provided a Framework Agreement notably in 2018 to the Albertine Graben Energy Consortium, which lapsed last year. It is understood that the new partners have made commitments to the financing of the refinery, allowing the negotiations to focus on technical and commercial aspects.
In the event the negotiations progress swiftly, UNOC and the consortium will form a joint interest company (a name has not been agreed yet) to move to the next stage. In this company, UNOC will retain a 40 per cent ownership while the consortium of Alpha MBM, SKA and SPEC will take 60 per cent, according to the present proposals.
Uganda has leaned on a side of a domestic refinery consistently since the discovery of commercial quantities of crude in 2006. A government study undertaken by Foster-Wheeler (FW) Energy in 2010 prioritized a refinery as presenting more commercial and economic benefits than a crude oil pipeline by comparing both options.
Also known as the Uganda Refinery Study, Foster-Wheeler concluded that “the construction of the refinery appears attractive provided the refinery capacity is matched to the East African demand (for petroleum products) and that crude oil supply be available at around 60,000 barrels per day”.