Uganda oil refinery takes shape with compensation plans

Uganda has begun moving people to make way for the construction of an oil refinery to be commissioned in 2017. The refinery will be located in Hoima, Western Uganda, near the oil fields.

Speaking in Nairobi on Tuesday at the sidelines of the East African Power Industry Convention, Uganda’s State Minister for Energy, Simon D’Ujanga, said the Ugandan government was compensating people living on the 29 square kilometre piece of land.

“We are paying off the people to make way for the construction,” said Mr D’Ujanga. The refinery will be 40 per cent owned by the five East African Community member states with the 60 per cent to be owned by private investors.

The investors will be picked from countries with experience in oil separation such as India, Korea and Japan.

The East African region is quickly emerging as an oil and gas producer with commercially viable quantities of the resources having been found in Uganda and Tanzania respectively.

Though the commerciality of Kenya’s oil is yet to be proven, reports from British oil explorer Tullow and its Canadian counterpart Africa Oil Corporation have indicated that the country’s resource exceeds the threshold for production.

The refinery will have an initial capacity to process 60,000 barrels of oil per day, which will later be doubled.

Heads of states of the EAC countries are set to meet in Kigali at the end of this month to make final investment decisions on the venture.

“There will be a meeting in Kigali later this month where we will make a final investment decision. There have been other meetings, including recently in Mombasa,” said Mr D’Ujanga.

Having a refinery in Uganda is important for the country which is currently at the verge of producing its oil.

For Kenya, the facility could lead to a cut in the cost of imported refined oil products which currently caters for 60 per cent of the industry needs, while 40 per cent is sourced as crude for refining at the Kenya Petroleum Refineries Limited facility based in Mombasa.

The Mombasa refinery is, however, old and inefficient, which rules it out as an option for refining the new oil finds in the region.

The government and Indian conglomerate Essar Group, who are joint owners of the refinery, have been evaluating whether to upgrade the facility or build a new one altogether.