The Uganda National Oil Company is designated to hold a 40% equity in the refinery, with the remaining stake to be controlled by Alpha MBM Investments LLC.
This agreement has garnered considerable attention from numerous oil stakeholders, not only within Uganda but also across the broader East African region, including Kenya Pipeline, which indicated that the proposal posed no threat.
The refinery in Albertine Graben, when finished, would have the capacity to produce 60,000 barrels of crude oil per day, effectively cutting down Uganda’s $2 billion (Sh 258 billion) yearly petroleum product import bill, which is primarily imported through Kenya.
The regional expansion strategy of the Kenya Pipeline Company (KPC), specifically the proposed Eldoret-Kampala-Kigali refined petroleum products pipeline project, is reportedly subject to the most substantial adverse impact once the refinery commences operations.
However, as reported by Star Kenya, Joe Sang, managing director of Kenya Pipeline, has refuted such claims, noting that the company would be largely unaffected by Uganda’s refinery project.
“Uganda refinery is not a threat, it will take up to 15 years for Uganda to start refining oil,” Kenya Pipeline managing director Joe Sang said during a media briefing on the Initial Public Offer (IPO) in Nairobi.
Kenya Pipeline, currently undertaking the process of publicizing its government-owned shares, has tendered 11.81 billion ordinary shares for sale in its initial public offering.
These shares are priced at Sh9 each, which constitutes a 65% ownership stake in the company.
What Kenya Pipeline said
“The investments are expected to be funded through a combination of internally generated cash flows and innovative financing structures, including access to debt capital markets, SPV project financing, joint ventures and partnerships, among others,” the IPO information memorandum states.
About 90% of the company’s refined petroleum (about 2.5 billion liters per year) is exported to Uganda, making it the company’s major transit market for petroleum products.
Kenya Pipeline, which primarily manages the transportation of refined oil, is optimistic that Uganda will keep importing refined goods for the “foreseeable future.”
“Even when refining capacity becomes a reality, world oil markets are fully integrated, meaning there are no regional markets for oil; all oil competes in the world oil markets on the basis of its production and scale economics,” Kenya Pipeline revealed.
“It will take a long time for the Eastern African regional market consumption levels to justify crude refining scale and margins at the best world oil markets’ level,” it added.
