Uganda oil company to increase share of its oil
THE EAST AFRICAN STARDARD – 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).
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.