East Africa leaders agree on new oil refinery

Warri Refinery04 September 2013, Kampala – Uganda has kicked-off plans to construct an oil refinery that will churn out 60,000 barrel of oil per day, dwarfing Kenya’s refinery that operates at half that capacity.

Five East African Community countries have until October 15 this year to confirm their participation in putting up the oil refinery in Uganda.

President Uhuru Kenyatta committed the country to a proposal to jointly build the new and complex refinery to refine recently discovered oil in the two countries.

Acquisition of the 29-square kilometre of land for the refinery and other attendant infrastructure is ongoing and is expected to be completed by March 14 next year.

Kenya’s president Kenyatta, Uganda’s Yoweri Museveni, Rwandan Paul Kagame, South Sudan’s Salva Kiir and Pierre Nkurunziza of Burundi last week signed a joint communiqué dated August 28 that outlines their commitment. The Tanzanian government was not represented.

The presidents also agreed on several other infrastructural projects at the Whitesands hotel in Mombasa.

The decision has been informed by statistics that indicate the regional consumption currently stands at over 200,000 barrels of oil per day and growing at five per cent per annum.

The only existing refinery in the region, Kenya Petroleum Refineries limited only produces 35,000 barrels per day and can only reach 70,000 after an upgrade.

But the facility cannot handle the new discovered oil deposits in the country and its neighbours’ in Ugandan and South Sudan.

The refinery is run by India’s Essar Energy and the Kenyan government and serves Uganda, Rwanda, Burundi, Tanzania and Democratic Republic of Congo.

It is estimated that the Kenyan economy loses over Sh8 billion from the inefficiencies associated with the refinery that was almost shut down early this year.

This led to the Energy and Petroleum cabinet secretary Davies Chirchir to form a ministerial committee to upgrade the facility and to seek Sh103 billion for that purpose.

The successful exploration and discovery of significant oil deposits in Kenya and Uganda has called for the construction of the new refinery that will be linked all the way to the Mombasa port for export.

Two studies, one on storage and transportation of crude oil from the oil fields to the refinery and another on the storage and transportation of refined product from the refinery to the market have been concluded.

According to the proposal by the participating states, the refinery will be developed in a modular manner under a public private partnership with a proposed 40 per cent:60 per cent sharing respectively.

The East African partner states will also be considered in the public share with a 10 per cent shareholding set aside for that purpose.

The Ugandan government will procure a transaction advisor to guide the states in the sourcing of a lead investor and funding for the refinery.

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