Dangote’s Warning Puts Uganda’s Oil Refinery Plans in Spotlight

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Africa’s richest man Aliko Dangote, has expressed alarm over the lack of new oil refineries on the continent over the past 35 years, attributing the crisis to the vested interests of fuel importers. 

Dangote told CNN reporter, Eleni Giokos, that despite Africa being a major oil producer, no new refineries have been built in the past 35 years.

“There are other countries in Africa who have been trying to build refineries but have been unable to,” Dangote said. “There has not been a new refinery in Africa in the last 35 years.”

He stressed the need for Africans to take ownership of their continent’s development, urging them to collaborate and invest in building a more self-sufficient future.

“We Africans have to make sure that we focus and realise that we are the only ones that can deliver. We Africans are the only people that can develop Africa. If we are waiting for foreign investors to come and develop Africa, it will never happen,” Dangote said.

Dangote’s statement comes at a time Uganda is struggling to build its oil refinery in Kabaale Industrial Park. 

While construction of the pipeline is ongoing at break-neck speed to export crude oil through Tanzania’s Tanga Port by 2025, Uganda is yet to break ground for the construction of the oil refinery in Kabalega Industrial Park (KIP).

Yet, with the refinery, Uganda would be able to produce motor gasoline, ethanol, jet fuel, fuel oils for heating and electricity generation, asphalt and road oil, feedstocks for making chemicals, plastics and synthetic materials that are in nearly everything we use.

According to Uganda National Oil Company (UNOC), KIP is expected to contribute about $4.9bn per annum to the national Gross Development Product (GDP) by attracting heavy polymer and fertiliser industries; light /medium industries; agro-processors; warehousing and Logistics.

“Preliminary economic modelling by UNOC of KIP, with its wide range of industries and commercial activities supported by the international Airport and our national road network, is expected to yield up to USD 4.9 bn per annum to National GDP,” said UNOC in a recent statement to ChimpReports. 

This figure excludes revenues generated by the planned oil refinery in the area.

Moreso, at the Refinery’s peak operation of 60,000 barrels per day, the jobs created in the park are expected to reach 18,000 and up to 35,000 including indirect jobs.

The industrial park is also expected to improve Uganda’s Balance of Payments by USD 849 million per annum; create a fiscal impact of USD 1.2 bn per annum and create 35,000 job opportunities, according to UNOC’s figures. 

Africa’s richest man, Aliko Dangote

Uganda recently tapped Alpha MBM Investments LLC from the United Arab Emirates to develop its $4.5 billion 60,000 barrel-per-day refinery after kicking out a consortium of American and Italian firms known as Albertine Graben Energy Consortium (AGEC).

ChimpReports understands Uganda acted against AGEC over the consortium’s failure to show genuine interest in developing the critical infrastructure expected to attract over 100 factories in the Kabalega Industrial Park. 

According to Energy Minister Ruth Nankabirwa, AGEC “failed to complete essential requirements, including; commitment letters from lenders making up at least 100% of the required debt before FID, signed commitment letters from equity investors, the Environmental and Social Impact Assessment (ESIA), submission of a lump sum turnkey price for the project, execution of a Commercial Viability Assessment (CVA), and procurement of a financial advisor, among others,” the Ministry added.

“These deficiencies ultimately prevented the attainment of the FID, as outlined in the PFA.” 

An oil and gas expert who preferred anonymity to speak freely said, “It would appear that AGEC did not want us to have a refinery. They had a partnership with the wealthy company, General Electric. Did they fail to raise Shs 4bn for construction of the refinery?” 

AGEC claims it successfully met all milestones outlined in the Project Framework Agreement (PFA) and was on track to achieve the Final Investment Decision (FID).

However, the Ministry of Energy said certain critical deliverables were not fulfilled by AGEC within the specified timelines, leading to the expiration of the agreement on June 30th, 2023.

Delays or sabotage?

The government has over the last 17 years stuck with the prospect of having a refinery in the country notwithstanding the independent experts’ questioning its viability in a landlocked nation.

The licensed international oil companies including; Total (now TotalEnergies), Tullow (which has since sold its Uganda interest to TotalEnergies) and CNOOC had for a long time preferred a crude oil export pipeline but President Yoweri Museveni insisted an oil refinery had to be built in Uganda.

However, the government later reached a compromise with the oil companies to have both the pipeline and the refinery. The government moved quickly with its refinery proposal in August 2010, by instituting a feasibility study. 

The Minister of Energy and Mineral Development, Ruth Nankabirwa.

In 2022, The Independent reported that a Swiss-registered firm, Forster Wheeler, concluded in its report to the government that building a refinery in Uganda was “economically viable.”

That study gave the government the impetus to invite potential investors to bid and build the refinery near the shores of Lake Albert. But the government’s plans have repeatedly suffered as selected companies have tended to pull out at the last hour.

In December 2013, the government shortlisted several firms to build the refinery, but the tender was not awarded until 2015.

 In early 2015, a Russian consortium, RT Global Resources, was selected by the government as the “best-preferred bidder” while the South Korean consortium SK Energy was put on standby as the “alternative preferred bidder” to build the refinery.

However, a year later, the Russians pulled out of the deal. The government turned to the alternative bidder, SK Energy, but the South Koreans also pulled out because they could not afford to take a risk of up to 60%, being the shares given to the lead contractor. The government went back to the drawing board and advertised for a new bidding round.

President Museveni has been the chief enthusiast of Uganda’s oil refinery. During the signing of the so-called “final oil agreements” in April 2021, Museveni said Uganda’s delay to commercialise its petroleum resources was partly due to his reservation about the crude oil pipeline being the only outlet for the country’s crude oil.

“It has taken these 15 years before first oil on account of the divergent perceptions between us and the oil companies. Initially, I did not favour the idea of the pipeline. My question was: Why export the oil? Don’t the East Africans need oil?” Museveni said.

He said he based his demand on the regional market that he claims straddles the border regions of northwestern Tanzania, western Kenya, Rwanda, Burundi, eastern DR Congo, South Sudan and southwestern Ethiopia. 

Museveni said then that the demand for oil in this market was at the moment estimated at 98,250 barrels of oil per day, with Uganda’s current demand standing at 38,785 barrels per day.

However, as things stand, Uganda may see most of its oil being exported to developed countries which will in turn sell refined petroleum products to Uganda at higher prices. 

Dangote’s observations 

Dangote emphasised the lack of access to financing for investors due to weak financial institutions in many African countries. 

He pointed out that this, combined with political complexities and resistance from those benefiting from the current import system, has created a significant barrier to progress.

Dangote’s own $20 billion Dangote Refinery in Lagos, Nigeria, is ramping up production and making significant strides in exporting refined products across Africa, Europe, and Asia, according to Business Day Nigeria.

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