Uganda quietly seeks funds for $4b oil refinery

By Julius Barugaba, KAMPALA Uganda

Uganda government officials have been racking up air miles between Entebbe, Italy and US to strike a financing deal for the $4 billion refinery project.

Government officials admit that the refinery project has fallen behind others, and will likely come onstream late in 2027 at the earliest if the necessary financing is tied up and the pending technical studies concluded sooner.

As a result, local players that were primed to take up equity in the project as well as regional countries that expressed interest in the refinery that was sold as an East African Community (EAC) venture, remain non-committal, citing the project’s failure to take shape since 2018, when it was awarded to a consortium of investors.

Potential investors say they remain open to discussions with the government, but without an engineering, procurement and construction (EPC) structure, the refinery remains an unbankable project.

"The problem is that the refinery doesn’t have a structure yet — an EPC structure,” said Richard Byarugaba, managing director of the National Social Security Fund, a Ush14 trillion ($3.68 billion) Fund that the government approached in 2015 to take up stake in the project.

The NSSF, which traditionally invests heavily in fixed income assets, securities and real estate, has since 2017 been looking to diversify its investment portfolio by moving into private equity space in new areas especially oil and gas.

Officials in Kampala admit that the project has struggled to attract more interests and investment commitments from other EAC countries besides Tanzania and Kenya, who offered to take up part of Uganda’s 40 percent shareholding.

Indeed, Africa Intelligence news service reported last week that Uganda is struggling to garner enough enthusiasm from private sector partners to finance the ambitious project located at Kabaale in Hoima District in the west, and storage projects in Mpigi District, central Uganda, where refined products will be stored before distribution.

On paper, Uganda remains with a 29 percent stake after Tanzania and Kenya take up their 8.5 percent and 2.5 percent shareholding respectively. Rwanda and Burundi declined participation in the project, while there is no local entity that has committed to take up shares.

"Now we have South Sudan and DR Congo as part of EAC; I am not sure if they will come onboard. But it’s useful for all [EAC] countries to participate,” said Peter Muliisa, chief legal and corporate affairs at Uganda National Oil Company (Unoc), a government entity that oversees its interests in the oil sector. - AFP