Since the start of development of an oil industry, the Ugandan government has been planning to build an oil refinery at Kabaale in Hoima district in the Lake Albert basin. The Observer news agency reported that the refinery is to be developed under public –private partnership (PPP), in which a private firm would get a 60% stake in the oil refinery and the government would stay on as the minority shareholder with a 40% stake, in what the paper wrote would likely be the largest infrastructure project ever undertaken in Uganda.
Ugandan President Yoweri Museveni has favored and promoted the construction of the Hoima refinery to add value to the national oil industry, according to Oil in Uganda. But the topic of the scale of the refinery to be built has generated debate and disagreement, particularly between the government and the international oil companies (IOCs) operating in the country.
Disagreements over refining capacity
The government's plan is to develop a 60,000 barrel per day (bpd) refinery that will later be expanded to 120,000 bpd and then 180,000 bpd, All Africa quoted a Ministry of Energy document as saying. All Africa reported in September 2012 that this huge capacity was driving away the oil companies that were brought in to fund it, and who had in mind a small refinery of 20,000 bpd, costing about US $600 million. A refinery of the size the government is pushing for would cost between US $3 billion and US $5 billion.
The government's ambitious vision for the refinery represents its attempt to strengthen the Uganda's refining independence, according to Business Monitor International. But BMI quoted Eoim Mekie, Tullow's Uganda country manager, as saying that a facility with a capacity exceeding 60,000 bpd would not be viable and would struggle to find sufficient regional demand. The companies, led by Tullow, would prefer to export the majority of Uganda's oil by pipeline.
New oil discoveries in Kenya in March 2012 complicated the matter. BMI wrote in July that Kenya's Mombasa refinery already has the necessary infrastructure to harness these new discoveries and supply the regional market refined products, and that the Mombasa plant is more flexible and adaptable to shifts in demand patterns than the landlocked Hoima project.
Nevertheless as of late-2012 the two sides remained locked in contention. All Africa said that Ministry of Energy officials, backed by President Museveni, have maintained that without a refinery, however small, no drop of oil would be exported by the oil companies.
The Monitor reported that more than 8,000 people face eviction from 13 villages in Hoima District to pave the way for the construction of the oil refinery. Communities in the vicinity of the planned complex have complained about insufficient discussion of the project with members of the local community, according to Oil in Uganda.
- "Oil refinery: BAD DEAL", The Observer, 1 October 2012.
- "Rocky start for refinery", Oil in Uganda, May 2012.
- "Uganda: Museveni, Investors Fight Over Refinery", All Africa, 22 September 2012.
- "Hoima Refinery Threatened By Kenyan Discoveries", Business Monitor International, 13 June 2012.
- "Hoima villagers divided over compensation", Sunday Monitor, 12 October 2012.