Kampala- New investment in the 211 kilometre pipeline for the proposed oil refinery in Hoima District to Buloba could unlock various opportunities for players in the oil and gas sector but government is yet to find a partner for the terminal.
“Right now we are developing the terms of reference for a strategic partner who we should be identifying very soon,” Ms Proscovia Nabbanja, the Uganda National Oil Company (UNOC) Upstream chief operating officer, said at the Stanbic Bank Enterprise Banking Conference in Kampala on Wednesday.
The master plan, she said, is available for the Buloba terminal and UNOC will hold majority ownership while the private company will own 49 per cent.
The pipeline will evacuate products from the refinery into a terminal in Buloba that is estimated to have about 240 million litres of different petroleum products.
As regards opportunities, Ms Nabbanja said the terminal will serve both local and neighboring countries.
Some experts have argued that UNOC cannot compete in the same marketplace with distributors in the downstream such as Shell and Mogas.
However, UNOC thinks focus on strategic reserves is critical besides as there is need to develop national content.
“If we get the volumes within the strategic terminal today, we can start by importing the refined products from Mombasa into the strategic terminal if we get a strategic partner immediately before the refinery comes on board,” Ms Nabbanja said.
UNOC is also worried that most of the existing storage terminals owned by downstream players are within areas that hardly meet set standards and believes this opportunity can perhaps help distributors reduce risk in the market.
Speaking about opportunities for small and medium enterprises (SMEs), Mr Dennis Kamurasi, the vice chairman of the Association of Uganda Oil and Gas Service Providers, said huge financial capacity gaps continue to pose a threat that local companies cannot ignore.
He said SMEs should be properly structured to access credit as well as getting exposed to joint venture partnerships with global companies.
According to UNOC, financing risks in the sector will require tailor made products for SMEs to tap into the upcoming opportunities such as transport, civil works, security, safety, information communication technology or even supply of goods and services.
Institutions such as bank are currently building financial products that will enable SMEs to invest in the sector by acquiring long term contracts.
However, according to James Karama, the Stanbic Bank head of oil and gas contract agreements are probably the most unappealing considerations because companies hardly pay enough attention to critical details.
“… when we finance contracts we get worried and concerned about how much finance we can give a contract of six, twelve months which can be terminated at any time,” Mr Karama said.
According to Mr Karama, SMEs are beginning to rely on big oil contracts that impede them from meeting their obligations such as loan repayment once the contract ends.
Therefore, he said, SMEs should hedge against idle capacity by deliberately diversifying their businesses, warning that companies that are tied into non-compliance to standards risk narrowing their chances of getting credit from financial institutions.
The signing of the East African Crude Oil Pipeline agreement last year, was a historic moment that meant a 1400km oil pipeline from Hoima to Tanga port will be constructed.
UNOC has since been in negotiations for the host government agreement.
Technical work and procurement such as that for the coating plant which will enable Uganda’s crude oil to flow through a heated pipeline is currently ongoing.
UNOC is also in the final stages of negotiations with the lead consortia, Albertine Graben Refinery Consortia and the project framework agreement is expected to be signed this April.