Uganda oil firm to in­vest in oil and gas ex­plo­ration, re­fin­ery, pipe­line, sale

UNOC to man­age Hoima project and Buli­isa, Nwoya districts oil fields

The East African - - BUSINESS - By HALIMA ABDALLAH Spe­cial Cor­re­spon­dent

The Uganda Na­tional Oil Com­pany Ltd has voted to in­crease its shares in the up­stream oil and gas busi­ness by five per cent, in ad­di­tion to in­vest­ing in down­stream and mid­stream ac­tiv­i­ties.

Up­stream ac­tiv­i­ties in­volve ex­plo­ration to oil pro­duc­tion; mid­stream ac­tiv­i­ties in­volve com­mer­cial­i­sa­tion of oil and gas, in­clud­ing pro­cess­ing and evac­u­a­tion to the mar­kets, re­fin­ery and pipe­line, while down­stream ac­tiv­i­ties in­volve stor­age of the fi­nal prod­ucts.

“Our anal­y­sis of the oil and gas projects shows they are not only strate­gic as­sets but prof­itable busi­ness ven­tures as well,” said Em­manuel Ka­ton­gole, the chair­per­son of UNOC board of di­rec­tors.

Cur­rent laws give the govern­ment a fixed 15 per cent stake in all up­stream ac­tiv­i­ties but UNOC is con­clud­ing the process to man­age its 15 per cent in­ter­est in the King­fisher de­vel­op­ment area (Hoima) and Tilenga De­vel­op­ment Projects (Buli­isa and Nwoya districts oil fields). UNOC wants to go into ex­plo­ration with in­ter­ests far above what has been pre­scribed by the law, riding on model pro­duc­tion shar­ing agree­ments, which pre­scribe 20 per cent state par­tic­i­pa­tion.

“Any par­tic­i­pat­ing in­ter­est that UNOC will ac­quire in the new ven­tures will be above the manda­tory 15 per cent state par­tic­i­pa­tion,” UNOC’S chief legal and cor­po­rate af­fairs of­fi­cer, Peter Mulisa, told The Eastafrican.

The Eastafrican has learnt that UNOC is go­ing into oil ex­plo­ration through joint ven­tures. This will fol­low com­ple­tion of on­go­ing data anal­y­sis and a com­pet­i­tive process to pick po­ten­tial part­ners.

“The govern­ment will fund its par­tic­i­pat­ing in­ter­est in a re­fin­ery and pipe­line. The up­stream cost for de­vel­op­ment is funded by li­censed oil com­pa­nies. As such, the govern­ment is not re­quired to fi­nance its share of the costs,” said UNOC spokesman Ibrahim Ka­sita, when asked about fund­ing modal­i­ties for the enor­mous ven­tures.

In down­stream ac­tiv­i­ties, UNOC is fo­cus­ing on the Bu­loba Stor­age Ter­mi­nal and the man­age­ment of Jinja Stor­age Ter­mi­nal. The com­pany in­tends to de­velop, build and op­er­ate the

Our anal­y­sis of the oil and gas projects shows they are not only strate­gic as­sets but prof­itable busi­ness ven­tures as well.” Mr Ka­ton­gole, chair of UNOC board

multi-user petroleum re­fined prod­ucts stor­age ter­mi­nal at Bu­loba, near Kam­pala, through a joint ven­ture.

UNOC has been man­ag­ing the Jinja Stor­age Ter­mi­nal since the end of May and plans to in­clude use of wa­ter trans­port on Lake Vic­to­ria to ease trans­porta­tion of petroleum prod­ucts to the ter­mi­nal.

UNOC, which is a whol­ly­owned govern­ment com­pany, will over­see the coun­try’s busi­ness in­ter­ests. In mid-novem­ber, the firm’s share­hold­ers ap­proved top oil and gas projects in­volv­ing ex­plo­ration, re­fin­ery, pipe­line, stor­age and man­age­ment of the in­dus­trial park in Hoima for in­vest­ment.

Ac­cord­ing to sources fa­mil­iar with the deal, es­ti­mates for the re­fin­ery and pipe­line alone show the govern­ment would need to in­vest close to $800 mil­lion.

UNOC’S share­hold­ers are the Min­is­ter for En­ergy and Min­eral De­vel­op­ment who will take a con­trol­ling stake of 51 per cent, while the Min­is­ter for Fi­nance, Plan­ning and Eco­nomic De­vel­op­ment will have a 49 per cent stake on be­half of the govern­ment.

The share­hold­ers are ex­pected to largely raise re­quired cap­i­tal for two mid­stream projects – the oil re­fin­ery and the East Africa Crude Oil Pipe­line.

The govern­ment has agreed to a pro­posal to own a 15 per cent stake in the pipe­line and hopes to in­vest at least $250 mil­lion.

It will cost $3.55 bil­lion to con­struct a 1,445km pipe­line from Hoima in western Uganda to the port of Tanga in Tan­za­nia, at a tar­iff of $12.2 per bar­rel, ac­cord­ing to the In­ter-gov­ern­men­tal Agree­ments signed be­tween Uganda and Tan­za­nia early this year.

The fi­nal cost es­ti­mates are ex­pected when the front-end engi­neer­ing de­sign (FEED) study is com­pleted and sub­mit­ted. The ini­tial tar­get date for com­ple­tion of the East Africa Crude Oil Pipe­line FEED, which started in Jan­uary, was Au­gust.

How­ever, the as­sis­tant com­mis­sioner in charge of Pipe­lines De­vel­op­ment at the Direc­torate of Petroleum John Bosco Habu­mugisha told The Eastafrican that the Au­gust tar­get date had since “shifted.”

The FEED, which is be­ing un­der­taken by Gulf In­ter­state Engi­neer­ing, will be used to de­ter­mine project costs, which are used as a ba­sis for bid­ding, de­sign and to source fund­ing from fi­nanciers.

UNOC also plans to take 40 per cent shares in the re­fin­ery project and has bud­geted for at least $500 mil­lion worth of its shares in the project. How­ever, the re­fin­ery in­vestor is yet to be iden­ti­fied as govern­ment con­tin­ues to hold di­a­logue Chi­nese-led con­sor­tium Guangzhou Dong­song En­ergy Group Co Ltd and Al­ber­tine Graben Re­fin­ery Con­sor­tium.

Con­cerns over how the govern­ment will raise the re­quired cap­i­tal also re­main.

The par­tic­i­pat­ing in­ter­ests shall be held through UNOC’S wholly owned sub­sidiaries: Na­tional Pipe­line Com­pany Uganda Ltd and Uganda Re­fin­ery Hold­ing Com­pany Ltd.

UNOC is also look­ing to man­age and op­er­ate the Kabaale petro-chem­i­cal in­dus­trial park, which will be on the 29.59 square kilome­tre piece of land ac­quired in Hoima. The In­dus­trial Park will host the re­fin­ery, an in­ter­na­tional air­port and re­lated in­dus­tries and ware­houses.

Pic­ture: File

UNOC plans to in­vest at least $250 mil­lion in the East Africa Crude Oil Pipe­line.

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