Uganda sees first oil refinery on stream by 2018


KAMPALA, Uganda -- The Ugandan government said Wednesday that the construction of its first oil refinery will come on stream by 2018 as the East African nation continues to develop its nascent oil sector.

The refinery, located in Hoima district, some 130 miles west of the capital Kampala, will supply refined petroleum products to the domestic market, as the country seeks to slash its imports bill and become self-sufficient in fuel products.

"The government plans to develop a refinery...starting with a capacity of 30,000 barrels per day by 2018 which will be increased to 60,000 barrels per day before 2020," the energy and minerals ministry said in a statement.

The refinery project, which is expected to cost $2 billion, is one of the most contentious elements of a prolonged debate over how Uganda should develop its newly found oil reserves, estimated to be around 3.5 billion bbl of crude.

In April, the government agreed to approve the construction of a smaller refinery along with a crude export pipeline to the north Kenyan coast, breaking a nearly-two year impasse with foreign oil companies that delayed the development of the sector.

Last month, China's state-owned Cnooc said it was interested in investing in the refinery, days after the Ugandan government announced that it would pay for Chinese-built infrastructure using future oil revenues.

The Chinese company, together with UK-based Tullow Oil and France's Total, are in the process of developing Uganda's oil fields in the Lake Albertine Rift basin. Cnooc is so far the only company among the joint venture partners to express an interest in the project.

Uganda discovered commercial oil reserves in 2006 but the development of the fields has dragged on, partly due to disagreements between the oil companies and government over the development plans and refining options.

Last month, Tullow said that it had made "substantial progress" with its partners and the government and expects to sign a memorandum of understanding for the development of the country's oil fields. The government has hired US-based investment firm Taylor-DeJongh, which is providing advisory services on the selection of a lead investor for the refinery, the sourcing of financing as well as the formation of a refining company.

Dow Jones Newswires

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