Uganda moves a step closer to a domestic oil refinery

Uganda has taken a step forward, once again, to restore its interest to have a domestic refinery in place as part of the overall plan to maximize the benefits of the oil and gas sector.

The new players are a UAE-led consortium associated with His Highness Sheikh Mohammed bin Maktoum bin Juma Al Maktoum, a member of the Dubai royal family. The firm known, as Alpha MBM, is an investment vehicle, part of the MBM family of investments listed also as private interest of the Royal Family.

Alpha MBM is in consortium for the refinery project with two companies with extensive oil and gas experience. They are SKA Energy, a sub-division of the SKA International Group, an Iraq-based operator. SKA’s business is in construction, fuel supply and logistics as well as refining and petrochemicals.

While Alpha MBM will be the primary source of investment capital, it is SKA’s construction and oil marketing experience that will form the commercial block of the consortium. Lastly is SPEC energy, a fairly well-known oil and gas integrated firm with a presence in the Middle East.

SPEC for the Uganda refinery project is presenting its operated refinery projects at four locations (Slemani, Iraq, Al Barham in Kirkuk, San Company refinery in Rajaf and Kyber refinery in Pakistan as well as other projects).

Presently, the refinery consortium is in expedited negotiations with the government of Uganda. The negotiations are time-sensitive because crude production is set to begin next year and project work on the East African Crude oil pipeline (EACOP) is further ahead. The EACOP company is finalizing its financing with its primary lenders which is expected to be concluded by May 2024.

The Uganda National Oil Company (UNOC) and the ministry of Energy intend to bring the refinery agreements firmly into place around the same time. To this end, the senior agreements for the refinery, namely an Implementation Agreement and a Crude Supply Agreement, are being negotiated.

This is a departure from the previous project-based approach where the government provided a Framework Agreement notably in 2018 to the Albertine Graben Energy Consortium, which lapsed last year. It is understood that the new partners have made commitments to the financing of the refinery, allowing the negotiations to focus on technical and commercial aspects.

In the event the negotiations progress swiftly, UNOC and the consortium will form a joint interest company (a name has not been agreed yet) to move to the next stage. In this company, UNOC will retain a 40 per cent ownership while the consortium of Alpha MBM, SKA and SPEC will take 60 per cent, according to the present proposals.

Uganda has leaned on a side of a domestic refinery consistently since the discovery of commercial quantities of crude in 2006. A government study undertaken by Foster-Wheeler (FW) Energy in 2010 prioritized a refinery as presenting more commercial and economic benefits than a crude oil pipeline by comparing both options.

Also known as the Uganda Refinery Study, Foster-Wheeler concluded that “the construction of the refinery appears attractive provided the refinery capacity is matched to the East African demand (for petroleum products) and that crude oil supply be available at around 60,000 barrels per day”.

In many ways the Forster Wheeler report has now come full circle. Some aspects of it including the refinery configurations may be modified. Since the study was concluded, UNOC has upgraded its refinery configurations to a higher standard requiring more investment and it remains to be seen what the consortium will produce given the tight timeframes involved.

A silver lining here is that prior to exiting its agreement with the previous consortium, AGEC had completed a Front- End Engineering Design for the kind of refinery that Uganda wanted. The question remains if this design (it may be the property of AGRC still) will be migrated to the new project or a modular version adapted. Either path has cost implications since government planners would like to keep these down (to around $3.2 billion).

Under the Tariff and Transportation Agreement (TTA) entered into by the East African Crude Oil Pipeline Company (EACOP), where UNOC holds government interest, there is a stipulation otherwise known as a Domestic Market Obligation that requires EACOP to provide crude to the refinery for purposes of serving the domestic (EAC) market that guarantees oil to the project.

During COP28 negotiations in Dubai, Uganda launched its Energy Transition Plan (ETP), which carried current figures on the growing demand for petroleum products in the country. They show demand (all petroleum products are imported) has trebled since Foster-Wheeler finalized its report.

The ETP looks at this import replacement as a source of funds for the government but also as security of supply to guard against shocks to global supply such as what was experienced during the Covid-19 pandemic, and the subsequent geopolitical crisis in Europe and now the Middle East.

The choice of a UAE-based consortium too is interesting and a subject for another day. Suffice to say that oil being a geo-political mineral (now joined by critical minerals such as cobalt and other rare earth metals) presents its unique problems during times of global disturbance.

Uganda’s oil sector is designed to do global balancing, welcoming international oil companies (IOCs) and oil services firms from around the world often representing competing interests from their countries of origin.

Following the initial dispute between Heritage Oil and Gas and Tullow Oil, the wild cat companies that transacted on the initial discoveries, government officials and especially President Yoweri Museveni learned, not surprisingly, that ‘independent’ oil firms are also avatars of the interests of their home countries.

These companies are also eager to leverage these ties when their commercial interests are affected. Subsequently today Uganda hosts European, Chinese and now UAE interests, which bring a diversity of such pressures to offset the pressure that African producers (and other producers around the world) face when mineral sectors become the scene of geo-political tension.

As these negotiations mature, 2024 is the pivotal year for the oil and gas sector.

{loadposition inarticle}

1.3 million households to get connected to the national grid

The government has officially rolled out the Electricity Access Scale-up Project (EASP), a $638 million initiative that will connect over 1.3 million rural households to the national power grid.

The project, co-funded with the World Bank, aims to increase energy access for households, enterprises, and institutions through grid and off-grid connections. writes GEOFREY SERUGO.

On February 2, hundreds of residents from Mitooma gathered to witness the project launch, where the first 100 homes under EASP were connected to the national power grid. During the launch, the minister for Energy and Mineral Development, Ruth Nankabirwa, noted that the project will also positively impact the environment, employing solar technologies to reduce dependence on biomass.

“I am in charge of protecting power and improving the use of power, especially in green cooking. Therefore, as I develop the petroleum sector, I am mindful of the gas that is associated with petroleum. We have started drilling, and we have reached 25 wells in Tilenga and another 11 on the Kingfisher side. They are very promising, and we are going to start using associated gas,” she said.

On his part, Thomas Tayebwa, the deputy speaker of parliament, hailed the government and all development partners for what he termed a game-changer project. He further appealed to the Energy Ministry to sort out the problem of load-shedding.

“We have been finding it difficult to explain to people who have no electricity that Uganda produces excess electricity. Every financial year, parliament appropriates hundreds of billions of shillings to pay for electricity that is not consumed,” he said.

“It is extremely painful; so, I’m loving this EASP initiative because the electricity we have been paying for without consuming is now going to be consumed. It’s going to be a game-changer in the region and the country. Meanwhile, Nankabirwa assured Ugandans that the government will continue to expand the transmission and distribution infrastructure by constructing power lines and substations.

The transmission network has increased from 1,132 kilometres in 2005 to the current 4,355 kilometres, while the distribution network length has increased from 6,496 kilometres in 2005 to the current 76,922 kilometres.

“As we speak, we have expanded the backbone of electricity. That means that connectivity is going to be easier. And the government has come out to help you with connectivity. Power is not going to be free, but the government is determined to help you connect. I’ve seen homes where they are next to a pole, but somebody is still in darkness. That means it is not cheap to connect.”

Meanwhile, Irene Batebe, the Energy ministry permanent secretary, said all connections are free in line with Uganda’s free electricity connections policy.

“Both households that don’t require a pole and those that require one pole will be connected for free. The country’s current electrification rate stands at 58 per cent (off-grid and on-grid) and the target is to achieve universal access by 2030. The EASP will contribute significantly to this goal,” she told The Observer in an interview.

Some of the project beneficiaries expressed excitement, and they thanked the government for the initiative.

“We are so happy that, at last, we have electricity. We have been going through a lot of problems, but we are so grateful for this project,” Johnson Mugisha, a resident in Mitooma, said.

“We have been in darkness, but now the whole place is lit. The project is largely going to help our children revise their books at night and perform well.”

SOLAR BOOST

Meanwhile, the Energy ministry also launched a partnership with a company called d.light to supply solar equipment in off-grid power areas at 50 per cent, where half is contributed by the government and the other half by the beneficiary.

{loadposition inarticle}

The fight to save Njeru stock farm from encroachers

The existence of Njeru stock farm, the animal genetics hub that serves eastern and northeastern Uganda, is under threat due to encroachment and land grabbing.

This has greatly affected its productivity to the millions of farmers that rely on it for livestock breeding stock and liquid nitrogen. It is from this concern that various stakeholders have joined forces to save and revamp it, writes Geofrey Serugo.    

On January 19, 2024, Internal Affairs minister Kahinda Otafiire stormed Njeru stock farm and ordered the arrest and detention of the farm manager, Dr Carol Wabule. Otafiire claims he bought 100 acres of the farm in 2011 and that government is trespassing on his land.

Much as Wabule was eventually released on January 22, the episode drew criticism from various stakeholders. Otafiire’s lawyers of Ahamya Associates & Advocates later issued a notice of eviction and demanded for compensation arising from the non-use of the land, amounting to $19m (Shs 72bn).

The incident was just the latest in a series of raids on the farm and created uproar in parliament as legislators demanded protection of the stock farm, which is a key agricultural genetics centre for the east and northeastern regions.

The Observer understands there are several other high-ranking government officials and companies that have taken advantage of legal loopholes to encroach on the land, whose title of 1,099 acres is only left with 540 acres for use. At the moment, government is embroiled in a number of court cases targeting the farm’s land.

However, Bright Rwamirama, the state minister for Animal Industry, is spearheading government’s resistance and he is hopeful to reclaim every piece of the land that has been grabbed.

“Otafiire’s claim is based on forgeries and falsehoods, and therefore, we refute any claims of ownership and compensation as alleged,” he says.

In a recent tour of the farm, he reiterated that government will do everything possible to reclaim all the land. Rwamirama is supported by Njeru town council officials and environmentalists. Ham Mukasa family are the original owners of the land who leased it for the creation of the farm in 1948.

During the tour, it emerged that there are several factories that were constructed on the farm’s land, most of which were guarded by soldiers.

“This once tranquil place is now being polluted by smoke emissions. These emissions are degrading air quality and are exposing the cattle to respiratory distress,” said a ministry official.

SNAG & LIFELINE

Last week, parliament gave prime minister Robinah Nabbanja two weeks to present a report on the matter. However, sources close to the matter have intimated to The Observer that the prime minister has so far made no headway after being rebuffed as a ‘nobody’ by some of the individuals who encroached on the land.

“At the moment, she seems powerless to stop the encroachers but if she uses the powers vested to her, she can force them to disperse,” says a source familiar with the situation.

However, The Observer understands that on February 5, Rwamirama took the matter to cabinet where President Museveni directed Attorney General Kiryowa Kiwanuka to investigate the alleged forgeries and make a report within 14 days.

WHY THE STOCK FARM?

The location of Bukaya village where the stock farm sits is a quiet, scenic view that overlooks the source of the Nile. It is ideal for all kinds of tourism and industrial activities as well as real estate development.

An acre in the area is said to go for Shs 500m and it is said that several bigwigs are already eyeing the land for their individual interests.

“That place is best suited for tourism activities such as Nyege Nyege, bird watching, tourist accommodation and water rafting, among others,” says a source who preferred anonymity.   

WHY GOVT CANNOT RELOCATE NJERU STOCK FARM

For starters, the farm hosts the nitrogen plant, whose production capacity of five litres per hour enables the continuous supply of animal semen for artificial insemination for the eastern and northeastern parts of the country.

The stock farm also remains the only source of Liquid Nitrogen to all the human medical hospitals and health centers in the regions. Njeru also hosts the national pig grand-parent resources centre unit, which includes a farm with more than 300 farmer-preferred high-performing pigs.

The unit promotes sustainable production of pigs in the greater eastern region for the purpose of supplying quality pigs and pig products to meet local demands and free more pork for export.

What’s more, the farm acts as the focal point and distribution centre for agro-enterprises under the Parish Development Model (PDM) to provide high-quality cows, pigs, goats and chicken for farmers in the region.

In fact, the recently-released auditor general’s report of 2022-2023 financial year applauded Njeru stock farm’s interventions through acquisition and utilization of superior breeds in crossbreeding and availing superior breeds to farmers for breeding.

“The stock farm has shown promising results in improving cattle, goat, and pig breeds in terms of productivity, size, growth rates, and other desirable traits. These advancements have the potential to significantly enhance food security, increase farmer incomes, and boost livestock productivity across Uganda,” reads part of the report by John Muwanga, the auditor general.

At the summit of the the stock farm lies a UPDF artillery detach that is charged with securing the Nile bridge. This means that the government has security interests on that farm.

BACKGROUND

Available records show that the farm’s 1,099 acres are on four different plots, which were all registered in the names of Ham Mukasa and later taken over by different descendant administrators.

It was leased to the governor of Uganda for 99 years effective in 1948 and government, through Njeru town council, has been a sub-leasee and occupant since 1967 to date.

All was well until 2000, when the Ham Mukasa family took government to court for failure to pay ground rent for more than 15 years. Rwamirama notes that whereas the ministry was paying the ground rent to Njeru town council, the latter was not remitting the same to the landlords [Ham Mukasa].

It was in that legal process that other people emerged to claim administration of the land.

“In 2009, Fredrick Kato Lukwajju emerged and claimed to be the administrator of the estate of the late Enoka Sebowa and obtained letters of administration granted by Justice Irene Mulyagonja at Jinja. He also applied for letters of administration from the High court to administer properties claiming that it belongs to the late Sebowa whereas not,” Rwamirama says.

“At around the same time, Christopher Lule also applied for letters of administration to administer the estate of the late Augustini Seruwo at the Jinja High court to administer properties claiming it belonged to the late Augustini Seruwo whereas not.”

It was from the two incidents that there emerged a spiral of sales by Lukwajju and Seruwo and whereas there are several cases still in court, many third-party land buyers, including Otafiire, claim they are bonafide purchasers.

{loadposition inarticle}

Gold tax evasion: MPs release damning report

Opposition members of parliament, led by Kira municipality MP Ibrahim Ssemujju Nganda, who also serves as the shadow minister of Finance, have raised concerns over the Uganda Revenue Authority’s (URA) failure to effectively collect taxes from the export of refined gold.

In their minority report for the Budget Committee concerning the 2024/25 budget framework, the MPs highlighted a significant gap in the nation’s resource envelope due to uncollected taxes from gold exports.

The report, referencing data from the Auditor General, points out that URA did not collect an estimated Shs 52.2 billion in taxes from the export of 70,837kg of gold.

“With $200 per kilogram, the Government was supposed to realize at least Shs 52 billion,” the report states.

The MPs suggest that the failure to collect these taxes is due to the proximity of individuals involved in gold exports to the president, which allegedly renders their businesses immune to URA’s typical enforcement actions. The report further notes that taxes on 22 mineral categories, amounting to Shs 72.4 billion in export value, were not levied by URA due to the absence of tax assessment and payment on certain mineral exports.

Additionally, the report expresses concern over the projected decline in tax collection for the upcoming financial year. Contrasting the expected Shs 285 billion with the previous trend of collecting over a trillion shillings more in taxes each year, the MPs question the credibility of these figures. They highlight the consistent growth in domestic revenue in previous years, even during the Covid-19 pandemic lockdown, and suggest that the projected low revenue growth for the next year raises suspicions.

The report asserts, “It is not possible that an economy whose GDP is projected to grow from 5.2% to 6% will have its revenue grow by less than 1%.”

The MPs speculate that either previous domestic revenue growth figures were inaccurately reported or there might be undisclosed intentions concerning the management of the country’s finances. The opposition MPs call for greater transparency and accountability from the government in managing and reporting the nation’s financial growth and tax collection.

President Yoweri Kaguta Museveni has consistently maintained that Uganda will not be adversely impacted by the withdrawal of donor funds. However, a minority report suggests otherwise, indicating that the country is facing financial constraints as a result of this withdrawal. This situation is leading the government to increase domestic borrowing and to take loans at commercial rates, further inflating Uganda’s already substantial debt burden.

The report reveals discrepancies in the reported figures of Uganda’s public debt. It quotes, “The Ministry of Finance puts the public debt at Shs 86.7 trillion while the Auditor General’s report to parliament says it is of Shs 97.499 trillion and the Bank of Uganda puts it at Shs 88.8 trillion.”

It also notes a significant increase in public debt within the current financial year, with an addition of Shs 9.329 trillion. The MPs expressed concern over this trend, saying, “Growing the public debt burden is one area where the NRM has excelled and registered unenviable and undisputable growth.”

The report further criticizes the government’s borrowing practices, citing instances of borrowing funds without proper readiness for utilization. The Auditor General’s report, as mentioned in the minority report, states that Shs 14.5 trillion in loans remain unutilized due to various reasons including unreadiness of projects at loan/grant contracting stages, delays in meeting disbursement conditions, poor project management, lack of counterpart funds, and slow land acquisition processes. The MPs question the rationale behind such borrowing practices, asking, “For God’s sake if your project is not designed, why do you borrow money?”

This situation raises concerns about the efficiency and effectiveness of public debt management in Uganda. The MPs’ report calls attention to the need for more prudent borrowing and project management practices to ensure that borrowed funds are used effectively and do not contribute to an unsustainable debt burden.

Next year, Uganda is set to allocate a significant portion of its budget to debt servicing, with at least Shs 20.6 trillion earmarked for this purpose. Of this amount, Shs 7.6 trillion will be used solely for interest payments, constituting 40% of the entire national budget. This substantial allocation highlights the growing concern over the country’s debt management.

Additionally, the report sheds light on the repercussions of Uganda’s failure to meet its loan obligations in the previous year. This shortfall led to the depletion of the country’s foreign reserves at the Bank of Uganda, which decreased from $4.463.6 billion to $3.629 billion. This decline in reserves underscores the financial strain the country is experiencing due to its increasing debt burden.

Moreover, the majority report echoes similar concerns about the escalating debt levels. It warns that if this upward trajectory continues, Uganda’s debt could reach unsustainable levels. The report cites that the “Debt to GDP has increased to about 52.7% which is above the 50 percent sustainability threshold.”

This increase in debt has led to a rise in interest payments, consequently reducing the fiscal space available for development expenditures. To address this issue, the majority report advises the government to “gradually scale down on domestic borrowing because of its negative effects on private sector credit.”

This recommendation is aimed at mitigating the adverse impacts of high debt levels on the country’s economy, particularly in terms of crowding out private sector borrowing and investment. The report emphasizes the need for a more balanced and sustainable approach to borrowing and debt management to ensure long-term economic stability and development.

Missing Naguru man found killed in Bujuuko

The body of Derrick Genza who went missing last week has been found on the roadside in Bujuuko, Mpigi district along the Kampala-Mityana road. 

Luke Owoyesigyire, the deputy Kampala metropolitan police spokesperson said Genza’s body has been transported to Mulago hospital for a postmortem. Police are yet to establish the reasons that could have led to Genza’s murder. 

“It looked like he was killed from another place and dumped in Bujuuko. We have collected some exhibits of evidential material which we have submitted to the police directorate of forensic science for examination,” said Owoyesigyire.

Naguru Go Down where Genza used to reside is synonymous with a high crime rate. Several months ago, the body of Jackline Nakabembe who was about to graduate at Makerere University was found dumped in a water trench. It was later discovered that she was killed by her boyfriend Dickens Agumeneitwe who had just been released from jail after serving a sentence related to rape and robbery.

Agumeneitwe said he killed Nakabembe because she was planning to cheat on him. Agumeneitwe tricked her by seducing her using a different phone number to test her faithfulness, a test she reportedly failed. Agumeneitwe who is now facing murder offences said he punched her near the breast and she died on the spot.

{loadposition inarticle}

Navigating financial opportunities in 2024: Your Comprehensive guide to dfcu Bank’s Ggwa Mu Bintu campaign

dfcu Bank, one of Uganda’s leading financial institutions has been at the forefront of Transforming Lives and Businesses in Uganda. The Bank is committed to doing this by being part of many success stories in Uganda’s economy in various sectors such as education, agribusiness, health, manufacturing, and many others. Bryan Katamba, the Sector Head of …

Gulu University: 1, 338 set to graduate

A total of 1,338 students are set to graduate from Gulu University’s 19th Graduation ceremony slated for Friday, February 9, 2024. According to Gulu University Vice Chancellor, Professor George Openjuru Ladaah, they initially cleared 1,414 students, but some had retakes and had not finished their research. That is how they reached the number of 1, …

Sauti Sol’s Bien Aime Baraza to perform in Kampala

Bien Aime Baraza, a vocalist, songwriter, guitarist and a band member of soul group, Sauti Sol, is set to perform in Kampala on February 15, 2024.  The event, which will be held at Kampala Serena Hotel, is being organised by Malembe Entertainment. Malembe said they expect “an electrifying experience for fans” at the music event. …

Lawyers vow to boycott New Law Year launch over judicial freedom concerns

A section of lawyers Uganda is calling for a boycott of the Judiciary’s New Law Year launch tomorrow at the High Court, citing concerns about judicial freedom. They allege that recent court orders have been issued to gag them from discussing critical issues, including the independence of the judiciary. Eron Kiiza, one of the lawyers leading the boycott effort, claims that these orders are intended to silence members of the Uganda Law Society (ULS) from discussing essential matters. He cites a recent case where President Museveni wrote to Chief Justice Owiny-Dollo and other judges, allegedly providing directions on how to decide a specific case. However, the society’s president, Bernard Oundo, has confirmed that he and other members will participate in […]

DRC WAR: M23 Rebels Defeated in Bloody Battle for Sake 

The M23 rebel movement has registered heavy casualties in its attempts to capture the strategic town of Sake, about 30 kilometres from Goma city in Eastern DRC.  ChimpReports has learned that M23 rebels on Wednesday morning launched a deadly offensive to capture Sake from Congolese armed forces and local militia groups.  The battle started around …

Museveni, Kenyatta Discuss Regional Mission for DR Congo

[New Times] Ugandan President Yoweri Museveni on Wednesday, February 7, received former Kenyan President Uhuru Kenyatta for a discussion about regional peace efforts for DR Congo.

Junior police officers can’t have children due to shared rooms – Report

The Uganda Human Rights Commission has released a report indicating that many of the junior police officers cannot produce children because they share dilapidated rooms with their colleagues. The report titled “Squeezing water out of a stone? Working and living conditions of the Uganda Police Force personnel and their implications on observance of human rights”, revealed that the police officers of lower ranks are living in poor housing units which are separated by curtains. While presenting the report to the Deputy Speaker of Parliament Mr Thomas Tayebwa on Thursday, the chairperson of the Uganda Human Rights Commission Ms Mariam Wangadya noted that there is a need to revise the welfare of the police officers. “The situation of housing or accommodation […]

Health ministry proposes boreholes for hospitals as water bill arrears sour to Sh14.9 billion

Ministry of Health Permanent Secretary, Diana Atwine, has proposed the construction of boreholes in hospitals to reduce unpaid water bills, which have risen to Shs14.9 billion as of January 2024. While appearing before Parliament’s Health Committee, Atwine said that water challenges are real in health facilities. “If you go to regional hospitals, health centre IIIs, […]

Tayebwa commends police despite harsh living conditions

The Deputy Speaker of Parliament, Mr. Thomas Tayebwa, on Thursday commended the Uganda Police Force for maintaining law and order despite facing harsh living and working conditions. Mr. Tayebwa received a report on the working and living conditions of police personnel and their impact on human rights observance in Uganda from the Uganda Human Rights Commission Chairperson, Ms. Mariam Wangadya, on Thursday morning. The report highlighted that police officers, particularly in lower ranks, reside in dilapidated shared housing and lack essential protective gear. Mr. Tayebwa expressed concern and challenged the government to investigate why officers persevere in their duties despite these deplorable conditions. He assured the Commission that Parliament will prioritize allocating funds in the 2024/2025 budget to cover pensions […]

Neycha program opens doors for second cohort of agroecological enterprises

The Neycha Accelerator & Fund, a joint initiative by the Biovision Foundation, SHONA, and SHONA Capital supporting agroecological enterprises (AEEs) in Kenya and Uganda, has announced that applications are now open for the second cohort of the program. Launched in 2023, Neycha provides capacity building, capital, and connections to help growth-oriented AEEs scale their impact […]

Don’t blame us for high fees, private schools say

The ongoing debate surrounds high school fees, schools defending the costs for perceived value...

Ask the Mechanic: What is the function of a differential?

A differential is a mechanical device designed to allow a flexible allocation of drive between...

Concern over rising cases of juvenile offender

Mr Luke Owoyesigyire, said in most cases, whenever they investigate cases of theft and robbery...

Fees outcry: Private schools association weighs in

Mr Hasadu Kirabira, the NPEIA chairperson, told the Monitor during a telephone interview on...

Companies clash over South Sudan cargo tracking deal

In a lengthy February 5 statement, Mr Musoke said URA officials used this meeting to demean...