May 8, 2009 / 9:57 AM / 10 years ago

Uganda to build mini oil refinery: minister

KAMPALA (Reuters) - Uganda plans to go-ahead with the construction of a mini-refinery for the east African nation’s 2 billion barrels of crude reserves after previously ruling the idea out, the state energy minister said.

Investor interest is heating up for Uganda’s oil discoveries since explorers Tullow Oil and Heritage Oil discovered hydrocarbons in the Lake Albert region bordering the Democratic Republic of Congo.

“We’re discovering fields almost every week. We have confirmed 2 billion barrels, but the other question is ‘Will the barrels get out of the ground?’ so we’re going to build a mini-refinery,” said Simon D’Ujanga, state minister for energy.

“This region geologically has not been tested for flow of oil so we are programming a mini-refinery in order to produce some oil and see,” he told Reuters late on Thursday.

In February, D’Ujanga told Reuters that the mini-refinery idea was scrapped due to large finds in the region, and that Uganda wanted to build a larger refinery.

He gave no other details on the mini-refinery.

Kampala expects to start pumping oil in 2010 or 2011.

Energy companies — Tower Resources and Dominion Uganda Ltd, a subsidiary of Dominion Petroleum — are increasingly turning off the beaten track and searching east and central Africa for crude.

Oil moved towards $58 per barrel on Friday .

MORE POWER

D’Ujanga said Uganda planned to increase the capacity of the Karuma hydropower dam project to 750 MW at a cost of $1.2-1.5 billion from a previous 200 MW scheme after the Norwegian firm Norpak pulled out late last year.

“This calls for more geological investigations,” he said. “We need to evaluate the environmental impact of problems that may be associated with it, so we are losing some time.”

Businesses complain that lack of power is a main obstacle for development. Energy deficits and load-shedding — power demand grows at 3 MW per month — cost Uganda one percent in economic growth annually, D’Ujanga said.

The Karuma dam should be completed by 2014 fulfilling part of a plan to increase electricity access to 15 percent of the country by 2020, from 9 percent at present, D’Ujanga said.

The government is constructing another 250 MW hydropower dam near the source of the river Nile.

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