18 March 2013

Uganda: Oil Firms Non-Commital About Uganda Refinery

Kampala — The Parliament of Uganda recently passed The Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012 making a faint leap towards the much awaited progress as regards extraction of oil and gas resources.

This comes after the parliament in December last year passed a similar law, the Petroleum (Exploration, Production and Development) Bill 2012, a decree that was highly contested within the elite circles because it empowers the Minister of Energy to grant, suspend and revoke oil and gas licenses.

In an earlier interview with East African Business Week, Peter Lokeris, Uganda's Minister of State for Mineral Development, said lack of laws was obstructing the country from achieving its goals in the oil and gas sector.

The minister also revealed that government doesn't have enough money to build the country's refinery in Hoima saying they are frantically looking for partners.

However when asked if investing in a joint refinery with government was a possibility, oil giants Tullow Uganda and Total E&P where reserved to commit themselves to such a venture.

In an interview, Ahlem Friga-Noy Corporate Affairs Manager, Total E&P Uganda said they have to wait for specifications when government makes an official call for partnership for them to a decision and a position.

"It is difficult to comment on this issue since no call for tender has been issued yet; therefore no specification has been released," Friga-Noy noted.

Well as Total is leaving room before they make their commitment, their counterparts Tullow are certain their interest is not in investing in a refinery.

They prefer to remain in the exploration and drilling business.

"No, this one won't be possible, Tullow is an upstream company, so we won't be investing in a refinery, we are not a downstream company," Cathy Adengo, Corporate Communications Manager, Tullow Uganda said.

The two companies together with China National Offshore Oil Corporation (CNOOC) from China command the biggest exploration rights in the great Albertine region which is home to close 4bn barrels of crude oil.

The issue of Uganda spending millions of US dollars on constructing a government owned refinery has been received with mixed reactions right from opposition leaders, civil society organizations and peasant Ugandans.

Dickens Kamugisha the Chief Executive Officer of Africa Institute for Energy Governance (AFIEGO) is among the many members of civil society activists who believe having a refinery in Uganda is a risky venture.

Kamugisha bases his arguments on fact that Uganda has not done specific studies comparing the option of refining and export crude oil.

He says Uganda's desire to build an individual refinery is premature.

"We all want to add value to our oil but the important thing is do we have capacity to do it," Kamugisha says questioningly.

Putting himself in a position that will attract scorn from a section of Ugandans who are for the refinery, Kamugisha suggests that a regional refinery outside Uganda would be a good thing for the East African countries.

This he says will ensure optimal utilization of resources since all countries have insufficient oil reserves to feed their respective refinery after many years of extraction.

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