Uganda Seeks Investor to Build $2.5 Billion Oil Refinery

Uganda is looking for a lead investor to develop a refinery estimated to cost $2.5 billion, two weeks after issuing its first production license to China National Offshore Oil Corp. as it seeks to exploit reserves.

The investor, either a company or a group of them, will be named by April and will take an interest of as much as 60 percent in the facility, which is proposed to have capacity of 60,000 barrels a day, Robert Kasande, an assistant commissioner in the Energy Ministry, said today by phone from Entebbe, near the capital, Kampala.

Uganda, classified as one of the world’s poorest nations by the World Bank, discovered oil in 2006 and has an estimated 3.5 billion barrels of crude, according to the Energy Ministry. London-based Tullow Oil Plc (TLW), Cnooc and France’s Total SA (FP) are jointly developing the finds. The country has sub-Saharan Africa’s fourth-biggest oil reserves.

“We need to finalize this process we have started today by April,” he said. The cost is still “tentative” as the accurate amount will be known after the investor conducts a feasibility analysis, he said.

The government’s stake in the facility will account for as much as 40 percent, and the nation has invited Kenya, Rwanda, Burundi and Tanzania, which are partner countries in the East African Community, to buy an interest of as much 10 percent in the facility from Uganda, he said.

Two Phases

The refinery may be developed in two phases, starting with a daily capacity of 30,000 barrels, Kasande said. Construction will commence in 2015, while production starts 2017, he said.

As many as 15 companies have expressed an interest in participating in the project, Peter Lokeris, state minister for mineral development, told reporters in London today.

The government secured 29 square kilometers (11 square miles) of land for the refinery in the western district of Hoima and will hand it over to the investors by April after compensating affected residents, Kasande said.

The Energy Ministry on Sept. 25 awarded Cnooc the first production license to develop the Kingfisher area in the Albertine region at a cost of $2 billion over four years. The area is estimated to hold 635 million barrels, of which 196 million barrels are recoverable. Kingfisher will pump 30,000 barrels to 40,000 barrels a day, the ministry said.

Tullow and Total will get oil-production licenses for other areas within weeks, Lokeris said in London today.

Uganda is eyeing both local and regional markets for its oil products, Kasande said.

Landlocked Uganda is also negotiating with oil companies to build a pipeline to the Kenyan port of Lamu, according to the Energy Ministry said. President Yoweri Museveni and his Kenyan counterpart Uhuru Kenyatta agreed to develop the link in June, saying it would also have a loop to South Sudan.

Uganda has sub-Saharan Africa’s biggest oil reserves after Nigeria, Angola and South Sudan, according to the International Monetary Fund.

To contact the reporters on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net; Nidaa Bakhsh in London at nbakhsh@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Paul Richardson at pmrichardson@bloomberg.net

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