Uganda should be congratulated for recently clinching an investment deal with Alpha MBM of United Arab Emirates (UAE) to construct a 60,000 barrels per day refinery in western part of the country where oilfields development is in progress. The $4 billion refinery shareholding will be 60 percent by the UAE investor and 40 percent by Uganda government entities.
Local commercialisation of Uganda oil resources through refining is a milestone realised by President Museveni who has persistently advocated for the refinery ever since oil was discovered in 2006.
The refinery project had previously witnessed several failed attempts to onboard investors, but with the UAE investors the project looks a done deal, ready to commence development since key studies and designs were already done.
The Uganda refinery was part of a memorandum of understanding (MoU) signed in 2013 between Kenya, Uganda and Rwanda to develop regional oil infrastructure, which in addition to the refinery included a joint crude oil pipeline from Uganda through Turkana to Lamu that eventually flopped.
The refinery targeted Great Lakes oil demands, which included western Kenya. A reverse-flow pipeline was planned from a refinery- fed oil terminal west of Kampala to Eldoret. A pipeline wayleave committed at the time between the two locations still exists.
In the meantime, Kenya has continued to invest in expansion of oil products imports and transit infrastructure to meet requirements for Kenya and Great Lakes export markets.
And this is what faces threats from actualisation of the Uganda refinery, a predicament which I am sure is preoccupying officials in Kenya’s Ministry of Energy.
I bet Uganda will argue that the MoU signed in 2013 was never formally retired and that the possibility of Kenya importing some of its oil requirements from Uganda has always existed.
When the refinery finally operational, Uganda will no doubt post competitive ex-refinery export prices that beat offshore imports landed and transit costs.
I have often contrasted Uganda’s economic development model, which mostly emphasises exploitation of natural resources and local production, with Kenya’s propensity for imported consumption which leaves local production (industrial, extractives, agricultural) significantly disadvantaged. Our Turkana oil and Kitui coal hardly ever feature on Cabinet agenda or political manifestos.
Kenya is conspicuously missing in African oil, gas and mining conferences, an indication that Kenya has no structured extractives investment promotion plans.
I am a realist who observes that in another five to 10 years, Kenya will be the economic laggard of East African Community. Tanzania and Uganda extractives-based economies are fully focused on commercialisation of their natural gas, oil, and minerals, which will deliver national wealth and jobs. And the two countries are fairly food-secure with minimal food imports.
Mr Wachira is director of Petroleum Focus Consultants.
