East African Business Week

KAMPALA, UGANDA- Uganda has finally settled for the construction of an oil refinery rather than a pipeline.
This was found less cost effective and, has a number of advantages over the construction of a 1950km pipeline to Dar es Salaam (southern route) or a 1325km pipeline to Mombasa (northern route) from the oil wells.
Uganda's state minister for mineral development Peter Lokeris told a workshop that was organized in Kampala to present results of the feasibility study on the oil refinery development, which the country finally agreed to construct.
"Yes we agree there will be need for construction of smaller pipes from the wells to the refinery. That is acceptable and will be done but not the one to Mombasa or Dar es Salaam," said Lokeris.
As part of the implementation of the National Oil and Gas policy and in line with the recommendations by the East African Strategy for Development of Regional Refineries, the government through the Ministry of Energy and Mineral development, with support from the Royal Norwegian government commissioned a feasibility study for development of a petroleum refinery.
Foster Wheeler Energy Ltd, an engineering firm from the United Kingdom was contracted to undertake the study. The study also aimed at recommending the optimum size, configuration, location and financing options for the refinery. It was also undertaken with an overall objective of supporting short term plans for commercializing the discoveries.
Lokeris said the government is considering phasing the development of the refinery to start with 20,000 barrel production per day.
"This will be early refinery in the short term which will be upgraded to 60,000 barrels per day refinery in the medium term, with expansion to 120,000 barrels per day in the long-term," explained Lokeris.
He said the government policy encourages the private sector to invest in the oil and gas industry. "The policy provides for public- private- partnership (PPP) giving government the opportunity to participate in business interests," he added.
According to Mr. Gerald Banaga, the head of the Midstream Petroleum Unit at the Energy Ministry said, Uganda will be able to reap about $3.2b in profits within a period of 2.7 years after construction of the refinery.
"The market exists in South Sudan, east DR Congo, Rwanda, Burundi and we can decide to go into direct competition with the Kenya Petroleum Refineries Limited for the western Kenya and Tanzania market," Banaga told petroleum stakeholders.
He said the total operating costs for the refinery will be around $132m, other than the $500m for the pipelines and $110m for land acquisition where the pipes would pass.
"Uganda's crude has less sulphur. We were supposed to face pipe heating costs and the issue of policing the pipe," explained Banaga. Mr. Robert Kasade, the assistant commissioner oil exploration indicated Uganda's refinery will have a market of  up to 100 million barrels.