Oil exploration in the Albertine Basin of Uganda. UNOC 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. PHOTO | FILE | NATION
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).
Sharing agreements
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 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.
Uganda's business interests
UNOC,
which is a wholly-owned 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.
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