Uganda to start building oil refinery in 2012

Tue Nov 30, 2010 5:03am EST

* Refinery to start at 20,000-25,000 bpd

* Output to eventually hit 200,000 bpd

By Elias Biryabarema and Barry Malone

KAMPALA, Nov 30 (Reuters) - Uganda will in 2012 start the phased development of an oil refinery that will initially meet local demand of up to 25,000 barrels per day (bpd) before scaling up to 200,000 bpd, an official said on Tuesday.

Keen on avoiding pitfalls that have bedeviled other sub-Saharan African oil producers, east Africa's third biggest economy has decided against exporting crude oil.

The government says it hopes refining capacity will guarantee higher earnings, generate more employment and help the country reach middle-income status.

The plant will match other planned refineries in South Africa and Angola to be one of the largest in the region.

"The whole of next year we'll go into serious planning for development," Fred Kabagame Kaliisa, permanent secretary at the mines and energy ministry, told reporters.

"That will include getting land and sitting with financiers and interested developers to tie into financing agreements."

Kabagame said the ministry and Uganda's cabinet were discussing a feasibility study carried out by Foster Wheeler (FWLT.O). The refinery is to be based in Hoima in western Uganda.

Uganda discovered commercial quantities of hydrocarbons in the Lake Albert rift basin along its western border with the Democratic Republic of Congo in 2006.

Exploration firms estimate reserves of up to 2.5 billion barrels.

"Between 2012 and 2016, the development of the refinery will be phased," Kabagame said. "We'll start with limited production to satisfy in-house market demand, then we'll go into bigger production to satisfy the international market."

Kabagame estimated Ugandan demand at 20,000 to 25,000 bpd and said the refinery would later refine for export, producing 200,000 bpd.

Britain's Tullow Oil (TLW.L) -- the biggest explorer in Uganda -- had initially said it would start commercial production in the last quarter of 2011.

In recent months, however, the company suggested a tax dispute between the government and Tullow's former partner, Heritage Oil HOIL.L, could delay that target.

Kabagame also said on Tuesday that 28 companies -- including several Chinese firms and Italy's Salini Costruttori -- have expressed interest in building the planned $900 billion Karuma hydropower dam, which will generate 700 megawatts.

A shortlist of eight firms will be issued in March of next year. Companies will have until July to carry out on and off-site reviews and submit their final bids.

"In August we'll award the winner because our aim is to see that in September/October someone starts work," Kabagame said.

(Editing by James Macharia)

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