After failed attempts that took Uganda around the globe in search of a partner for its $4 billion refinery, the country finally landed an investor in the United Arab Emirates (UAE), leading to the signing last weekend, of a historic deal between the government and Dubai-based Alpha MBM Investments Llc, whose subsidiary which will finance, design, develop and operate the 60,000 barrels-per-day facility.

The refinery is a greenfield investment expected to contribute 9 percent of Uganda’s GDP, once it comes onstream.

This figure could potentially jump to 20 percent when the Kabalega Industrial Park, where the facility is located, and includes a manufacturing hub for petrochemicals, is fully developed and operational, according to Uganda National Oil Company (Unoc).

The Implementation Agreement (IA), is a suite of key commercial agreements for the project, including the Crude Sales Supply Agreement, the Shareholders Agreement and the Host Government Agreement all embedded into one.

Initially pencilled in for signing at 2pm, the IA was eventually signed “at the last minute” on March 29, after a hectic day of back-and-forth activity emailing and faxing documents, amending clauses and renegotiating terms of the deal, which highlights the difficulty that the parties face to put into effect some of the refinery’s commercial terms on which the parties lacked consensus.

Energy Minister Ruth Nankabirwa signed on behalf of the government, while Unoc Chief Executive Proscovia Nabbanja and Sheikh Mohammed bin Maktoum bin Juma al Maktoum, who leads the Alpha MBM Group, signed on behalf of their companies, the implementing parties.

Read: Uganda signs deal with UAE investment firm over oil refineryAlpha MBM will hold a 60 percent stake in the refinery, while the Uganda government retains a 40 percent interest, held through its national oil company’s wholly-owned subsidiary, Uganda Refinery Holding Company.

Under the deal, Unoc – itself a 15 percent upstream investor in both the TotalEnergies operated Tilenga (190,000 barrels of oil per day) and CNOOC’s Kingfisher (40,000 barrels of oil per day) oilfields – will have the first call on crude, to supply the refinery.“Unoc will purchase the crude and pay the refinery a fee to process the oil,” said a source familiar with the IA.

President Yoweri Museveni, a strong advocate of the project as crucial for the country’s energy security and export of refined products to economies in the region, witnessed the signing in Kampala.“The oil refinery is not just about fuel but also about Uganda producing and exporting refined products instead of importing them. We must stop exporting raw materials and instead add value to everything we produce,” President Museveni said, in a post on X after the signing ceremony.

The deal is intended for the refinery to keep in touch with the upstream projects, which are at least two years ahead in development. In her New Year’s Day media briefing, Nankabirwa set strict timelines to commence negotiations on key commercial agreements and sign before end of the first quarter of 2025.

Thus, implementation of the project that has been moribund for the last 13 years now begins in earnest, to last three years, after which the facility will improve Kampala’s balance of payments by $591 million a year, contribute up to $3.3 billion to Uganda’s GDP annually, and up to $8.2 billion in capital formation.

For a country that runs an import bill of $2 billion a year, according to the latest data from the Petroleum Supply Department in the Ministry of Energy, the refinery makes economic sense for Uganda, as it would pay off handsomely and tap into the East African market for refined petroleum products.

In a region with no operational refinery, the Uganda facility would take a chunk of the market share from the import terminals on the Indian Ocean. Energy economists argue it would outprice imports from the Gulf arriving via the ports of Mombasa and Dar es Salaam.

The oil refinery project will also create an estimated 32,000 direct and indirect jobs.

Yet it is cautious optimism for most.

Uganda has been here before, negotiating deals that collapsed at the eleventh hour. In addition, questions surround the Emirati investor and the deals signed with the government, with red flags raised by top officials and state agencies about the company’s capacity to do the job, The EastAfrican has learnt.

Read: Uganda in talks with UAE firm over $4bn oil refineryIn late April 2023, just before the latest deal with the refinery investor fell through, the government and its then partner, the Albertine Graben Energy Consortium (AGEC) negotiated all the key commercial agreements for the development and operations of the refinery. However, they still hit a dead end after failing to reach the final investment decision (FID).

The AGEC group comprised US companies Yaatra Africa LLC, Nuovo Pignone International SRL, a Baker Hughes subsidiary, itself a GE company, Lionworks Group Ltd and Italian firm Saipem S.p.

A, which brought a lot of technical expertise to the discussions.

The negotiations involved upstream companies TotalEnergies, CNOOC and Unoc to ensure committed feedstock from the government of Uganda and the Joint Venture Partners, as well as negotiating terms for establishing operations of a commercially viable refinery receiving financing via capital markets.“The Government of Uganda and its Upstream Joint Venture Partners have made a commitment to AGEC to provide the crude supply to the Energy Security and Transition project and the talks with them are at advanced stages. The Project includes a refinery, product pipeline and product storage will provide energy products to Uganda and the East Africa region.“We look forward to reaching FID in the not-too-distant future as we conclude various agreements. The project will be transformative for East Africa—it is both value adding to Ugandan resources and will replace some of the carbon-intensive logistics of getting refined products into the region and provide alternative sources of and types of greener fuels for firms and households,” Paolo Pascuzzi, the AGEC country director, said at the time.

In another eight weeks, the Project Framework Agreement – signed between the government and AGEC in 2018 and renewed twice due to Covid-19 disruptions – expired and the refinery project reverted to the government, despite powerful lobbyists shrewdly arranging meetings with President Museveni to salvage the project.

Other companies have entered negotiations with Kampala, but quit on the verge of agreeing final terms. First up in February 2015 was a consortium led by RT Global Resources – a subsidiary of Russian hi-tech products producer Rostec – along with VTB Capital and oil company Tatneft.

According to the government, discussions with RT which had been picked as the preferred bidder out of 75 companies, broke down in July 2016 after the group made additional demands regarding the shareholders agreement before it would agree to sign the contract.

The government then invited South Korea’s SK Engineering to replace RT, but discussions with the firm also failed, leading to a three-year protracted search that ended in 2018 with the signing of the PFA with the AGEC group, whose major milestone was completion of the project’s Front End Engineering Design.

President Museveni then appeared frustrated with private companies and directed the sector’s political and technical heads to seek public corporations to partner with Uganda on the refinery project.

Despite a memorandum of understanding inked in early 2023 with the Algeria state-owned midstream and downstream giant Sonatrach as a potential partner for the refinery – with chances to secure financing by the US and Italian firms consortium looking grim – Uganda government, in a surprise turn of events shunted the Algerian company aside.

After signing with the North African nation, President Museveni announced: “We are looking at Algeria investing in our refinery. We want to build an inland refinery.”Read: Uganda seeks new investors for its $4b refinery projectHowever, in January 2024 Kampala announced Alpha MBM, a privately-owned company, as the preferred partner to develop the refinery.

In another surprise, in November 2024, Uganda’s Cabinet passed a resolution to ditch seeking project finance and wholly fund the refinery through equity, under the impression that the Dubai-based firm is a well-heeled investor with deep pockets. But this prompted some red flags.

First, in the negotiations, Alpha MBM several times rejected the government’s proposal that the refinery be wholly financed through equity but Kampala insisted on the same. Experts say that despite signing the deal, the task to raise $2.4 billion from the company’s coffers, is a significant challenge.“I can’t think of any midstream or downstream projects without debt financing, outside of Chinese megaprojects,” says Marc Howard, a London-based consultant who focuses on advising investments in energy projects in the African market.

Secondly, the entity that Kampala signed the refinery IA with is named Alpha MBM Llc International, a subsidiary of the Alpha MBM Investments LLC Group. Sources say this has caused some discomfort about Alpha MBM Llc International, a single-management company created six months ago, expected to execute a $4 billion project.

Besides the refinery deal, five other agreements were signed, with similar single-management companies, to develop aviation hubs in Uganda, digitalise the land registration system, develop a digital government payment system, tree planting projects and logistics development.“The question among several government agencies is, these are all huge agreements, but do we know if these single-management companies have the capacity to execute the deals?” said an official familiar with the deals, who requested anonymity to speak freely.

Thirdly, Alpha pushed for terms that would see the company compensated for its investment when the refinery project is retired after 25 years in production. This proposal would have a similar outcome to the rope-pulling that power distribution utility Umeme has been engaged in with government, after its 20-year concession came to an end.

Since 2012, Uganda has attracted potential partners from Russia to South Korea to the US via Italy, but none of these companies has proceeded past the negotiation phase to take FID – the next milestone for the Alpha MBM Group.

Officials in Kampala have declined to comment on when this might be, lest they jinx the project.“All we are waiting for now is FID, but when, we can’t say,” says Tony Otoa, chief corporate affairs officer at Unoc, a 40 percent stakeholder through its subsidiary Uganda Refinery Holding Company.“You know how long the other one took. It’s not on our side; it’s on our partner’s side. They can say let me go back and recalibrate first …it’s not something we can give a definite answer on.”

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