'Govt to speak on eight pct share purchase in Ugandan oil refinery when the time is ripe'

Oil drilling in the Albertine Graben in Uganda. (File photo)

 The government has said that it will speak about the 8 percent shares that the Ugandan government has invited it to purchase in its oil refinery when time comes.

 

Energy and Minerals deputy minister Charles Mwijage told ‘The Guardian’ on Tuesday in a phone interview that time is not yet ripe for the government to talk about the issue.

 

Uganda has invited four of the five East African Community’s five member states — Kenya, Tanzania, Rwanda and Burundi — to inject up to USD516m in equity capital into its first oil refinery project to process petroleum once the third leading economy in the region begins to pump out oil.

 

Private investors are expected to inject in USD774m while USD3bn will be borrowed from financial institutions.Failure by a partner state to pay for its allocation would open the door for Uganda to take up the forfeited shares.

 

The refinery will be co-owned 60 per cent by private investors and 40 per cent by the EAC members, translating into an 8 per cent shareholding for each country.

 

Minister Mwijage, who did not want to delve much on the matter, only said that, the government will speak on the offered opportunity when the right time comes.

Kenya, on the other hand has agreed to pay USD13m up front for its quota share in the proposed oil refinery even as the commercial viability of the multibillion-dollar facility remains unclear.

 

To be constructed in Hoima District, western Uganda, it is intended to be part of a joint effort to support infrastructure projects that will enhance regional integration.

 

The project, whose cost is estimated at USD4.3bn, will be largely financed through debt (70 percent), with shareholders expected to inject in the remainder.

 

Kenya has so far committed to a 2.5 per cent stake, so it will put in a total USD32m as part of equity contribution. That could, however, rise to USD103.2m if Kenya increases its stake to the maximum 8 percent reserved for each EAC member state.

 

Kenya’s Treasury Cabinet Secretary Henry Rotich said the commercial value of the refinery has to be determined before any more investment decisions are taken.

“We have to evaluate the commercial value of that project to see if there is a need for a higher stake,” Rotich told a regional paper.

 

Rwanda, Burundi and Tanzania are yet to decide on investing in the facility, which is expected to process an estimated 60,000 barrels of oil per day with an initial output of 30,000 barrels per day in 2018.

 

Whether the proportion reserved for the EAC member states will be fully taken up remains to be seen but the question of affordability and limited budgets facing member countries appear critical.

 

“The point really is how much you can afford because of the limited budgets we face,” said Davis Chirchir, Kenya’s Cabinet Secretary for Petroleum and Energy. “The participation by member countries in this refinery is more of a budgetary issue.

 

“Each partner state has been offered up to eight per cent stake in the refinery but in our case, we may not pick up all of it because of the budgetary constraints. If we had the resources we would take more, there is no question about that.”

SOURCE: THE GUARDIAN