Uganda and Dubai-based Alpha MBM Investments LLC have signed an agreement to jointly build a 60,000-barrel-per-day oil refinery in the East African country, Alpha MBM Investments has reported. Alpha MBM will hold a 60% stake, while Uganda National Oil Co. will hold a 40% stake in the refinery in Kabaale, Hoima County, the office of Ugandan President Yoweri Museveni said in an emailed statement.
The project will include a storage terminal and a 212-kilometer (132-mile) multi-product pipeline, according to the statement. The government estimates the project to cost about $4 billion, which is being launched to bolster its nascent hydrocarbon industry. Previous attempts by Uganda to attract investors for the project, initially proposed shortly after it discovered commercial reserves in 2006, have failed.
The decision was made after talks broke down last July with a consortium that included a unit of US firm Baker Hughes. The talks collapsed due to the consortium’s inability to quickly raise the necessary financing, which has hampered Uganda’s refining ambitions. TotalEnergies SE is developing Uganda’s oil fields, having found 6.5 billion barrels of oil, with up to 1.4 billion barrels of produced oil in reserve.
Refinery project
The collaboration, confirmed by Energy and Minerals Development Minister Ruth Nankabirwa, marks a significant step in Uganda’s efforts to refine crude oil domestically. Uganda’s oil reserves, located mainly in the Albertine Rift Basin along the western border with the Democratic Republic of the Congo, have been the subject of international interest. Despite the discovery of these reserves more than a decade ago, commercial production has been delayed by various logistical, financial and political challenges.
A planned refinery with a capacity to process 60,000 barrels of crude oil per day is the cornerstone of Uganda’s strategy to become a significant player in the global oil market. The government expects to begin commercial crude oil production by 2025, reflecting both the potential and challenges of the industry. Several factors have contributed to the delay in developing Uganda’s oil reserves. First, Uganda’s landlocked status creates logistical obstacles to transporting oil to international markets. This challenge requires the construction of extensive infrastructure, including pipelines and refineries, which is time-consuming and capital-intensive.
Second, the need for significant investment in a sector new to the country has been a significant obstacle. Initial negotiations with international companies such as Baker Hughes demonstrate the difficulty of securing reliable and timely financial support for such large-scale projects. Environmental and social concerns have also played a role. The Albertine Rift is a region of high biodiversity, and there are concerns about the impact of oil extraction on the environment and local communities. Balancing economic development with environmental conservation and social responsibility has been a delicate task for the Ugandan government.
Uganda’s partnership with Alpha MBM Investments
The partnership with Alpha MBM Investments is a new hope for Uganda’s oil industry. The participation of the UAE-based firm brings not only much-needed capital but also expertise in developing oil infrastructure, which is crucial for the landlocked country. In summary, while Uganda’s journey to becoming an oil-producing nation has been fraught with challenges, recent developments indicate positive developments. The government’s commitment to overcoming obstacles, coupled with strategic international partnerships, is poised to make significant strides in its hydrocarbon sector in the coming years. The successful development of the refinery will not only contribute to Uganda’s economic development, but will also help meet the energy needs of the region.
In addition to the refinery deal, Ugandan and UAE investors have also signed five other agreements in various sectors. Earlier this year, Uganda’s energy minister said the country was in talks to build a $4 billion refinery with Alpha MBM Investments. The UAE-based investment firm’s website says it is headed by Sheikh Mohammed bin Maktoum, a member of the Dubai royal family.
Discussions on key commercial terms between the Ugandan government and Alpha MBM Investments began on January 16 and were expected to be completed within three months, according to Energy and Mineral Development Minister Ruth Nankabirwa. The 60,000 barrel per day refinery is a cornerstone of Uganda’s emerging hydrocarbon industry, playing a vital role in the country’s energy strategy.