PROGRESS OF REFINERY AND ASSOCIATED INFRASTRUCTURE DEVELOPMENT

Irene Batebe
Petroleum Officer - Refinery PETROLEUM EXPLORATION AND PRODUCTION DEPARTMENT MINISTRY OF ENERGY AND MINERAL DEVELOPMENT

BREAKFAST METING FOR EDITORS AND SUB-EDITORS

16th APRIL 2013 PROTEA HOTEL, KAMPALA

PRESENTATION OUTLINE
1. Background 2. Commercialization plan for oil and gas resources
Short term plan Medium term plan Long term plan

3. Status of key activities in Refinery Development 4. Challenges 5. Concluding remarks

1. BACKGROUND

Upstream

Promotion & licensing Exploration Development Production Decommission

Midstream

Downstream

Bulk Transportation Refining Gas conversion

Distribution Marketing Sales

Backgroundcontd
Refining process
- Conversion of crude petroleum into useful petroleum products Refinery design is influenced by type of crude oil and expected products Lighter crude easier to refine than heavy crude oil Refinery comprises of several units Each refinery has a unique design as well as operating characteristics
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Background contd
Key drivers for refinery design
Ugandas crude oil is medium - light and sweet. Sulphur content 0.1 0.2% and API gravity 20 330 Petroleum product market demand is diesel driven with a ratio of 2:1 (diesel : gasoline) Region boasts of growing product market
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6 Light Naphtha Heavy Naphtha Kerosene Diesel VGO Vac Residue 1 0 Ugandan "Average" Maya Brent Bonny Light Arab light 4 3 2 5

Make up of Ugandan Crude Compared to some other typically traded crudes

Sulphur levels comparison

Refining Pictorial
Main process unit RFFCU

Gasoline storage

LPG storage

Refinery Complex

Background contd
Ugandas demand for petroleum products is about 30,000 bbl/day The region product consumption is about 200,000 bbl/day with a growth rate of 7%. The East African region has only one refinery of 70,000 bbl/day at Mombasa operating at half capacity. Product importation is faced with several challenges:
Reduced security of supply High import bill (est. 2 billion n USD)

There exists a Regional Refineries Development Strategy to boost the regions refining capacity
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Backgroundcontd
The National Oil and Gas Policy (2008)
The National Oil and Gas Policys goal is to use the countrys oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to society The policy provides for ;9 Plans to undertake medium and large scale refining to the satisfaction of national and regional petroleum products requirements in line with the countrys policy of value addition. 9 Optimal production of the countrys oil and gas resources through cost effectiveness

Building a refinery in Uganda is in line objective No. 4 of the Policy which is to promote valuable utilization of the countrys oil and gas resources.
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2.0 GOU Commercialization Plan

A. Short term plan (0 3 years) 9 Crude oil and gas for power generation until the refinery is operational 9 Extended Well Test crude oil for power generation, industry, etc. 9 Improvement of transport and infrastructure. B. Medium term plan (3 6 years) 9 Oil refinery development (60,000 BOPD) 9 Support transport and storage infrastructure development C. Long term plan ( > 6 years) 9 Expansion of refinery 9 Development of associated industries and support the energy based industry 9 Consideration of export options (for excess crude oil)

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Feasibility of refinery development

Detailed feasibility study for refinery development was conducted in 2010/11 and it assessed; Crude production potential Size and configuration of the refinery Location Financing options Social and environmental assessment, etc.

Study analysed the option of crude export pipeline Vs refinery development. It was concluded that refinery development is more economically feasible and beneficial to Uganda.
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Petroleum product market

Source: Feasibility study for refining, MEMD

The growing national and regional product demand is one of the key drivers for the refinery size and design options Product demand forecast to circa 370,000 BOPD by 2030 for the EAC region
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Benefits of Refining to Uganda

9 Ensure security of supply for petroleum products 9 Boost the regions refining capacity 9 Improving the countrys balance of payment by reducing the petroleum products import bill 9 Enable rational exploitation of the resource to support sustainable development

9 Contribution to the countrys growing energy requirement and mix (source of HFO and LPG) 9 Creation of jobs for Ugandans and transfer of Technology in the refining and associated industries 9 A refinery is a strategic development that will significantly enhance the competitiveness of the nation and the East African region at large.
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Refinery Ownership
Refinery will be developed on a Private Public Partnership (PPP) basis through a joint venture company with a proposed 40:60 sharing between public and private entities, respectively Higher participation share (60%) provides confidence to investors for funding and also operation of the industry. EAC Partner states have been proposed to participate with up to 10 % out of the 40% public shares. Consultations with the Partner States have commenced to establish the best participation arrangements. A special purpose vehicle (Refinery company) will be formed to take forward the development and operation
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STATUS OF KEY ACTIVITIES IN REFINERY DEVELOPMENT

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Legal and regulatory framework

A Petroleum Bill for Refining, Gas conversion, Transmission and Storage was passed by Parliament in February 2013. The Bill seeks to;
Facilitate investment in petroleum processing, transportation and storage facilities Promote equitable access to petroleum facilities, Provide for Health, Safety and Environmental compliance, among others Regulating the development, installation, operation and maintenance of suitable refining, gas processing, transportation and storage facilities. Provide security of petroleum processing, Transportation and storage

The Bill expected to be assented to by the President this year The process of formulating the ensuing regulations has commenced.
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Land acquisition process

The feasibility study assessed six potential sites and Kabaale parish, Buseruka sub-county was found to be the most suitable The land covers 29 sq.km in approximately 13 villages The land will accommodate the refinery, an aerodrome, waste management facilities, future associated industries such as petrochemical industries, staff quarters etc. The land acquisition process has progressed with the following activities:9 Sensitization of local residents 9 Demarcation of land boundaries that was conducted by Department of Surveys and Mapping from MoLHUD. 9 The RAP study was completed and compensation/resettlement will soon commence.
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Infrastructure for transportation and storage

This includes the upstream and refined product pipeline and storage facilities which will be required. Crude oil transportation A study to evaluate the pipeline and storage facilities for crude oil and gas in Uganda has been concluded. The study conducted by Fitchner MEI Oil assessed two pipeline routes;
Northern (96km,16 inch) Southern (46km,12.75 inch)
Refinery
Refined products pipeline

Source: Feasibility study for refining, MEMD

The Ministry is in the process of seeking Cabinet approval on the ownership structure.

Crude transportation from oil fields to refinery

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Infrastructure ..cont
Refined product transportation A multiproduct pipeline is required to transport refined products from the A feasibility study on distribution and storage facilities for petroleum
Kampala Terminal Multiproduct pipeline

Refinery to a distribution terminal at Kampala.

products from the refinery to the respective demand centers is being conducted.

Refinery (Hoima)
Pumping Stn

Following completion of the study, the Ministry will embark on sourcing

funding /investors to develop required pipeline

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Transaction Advisory (TA) Services

GoU procured a US based Energy Investment Financial Advisory firm TaylorDeJongh to offer Transaction Advisory services. The Transaction Advisor will among others;
Recommend the appropriate ownership for the refinery and the associated elements, including; crude and product pipelines terminal Evaluate and recommend the best ownership structure for the refining company. Evaluate alternative project financing structures and design a suitable financing plan geared towards obtaining the required finance for the oil refinery project Evaluate financial implications for Government of Uganda of different corporate and commercial frameworks for the refinery company Together with Government, source for the lead investor and financing for the refinery
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Environmental Baseline study

The Ministry is undertaking an Environmental baseline study The study will characterize the current environmental and social conditions in and around the refinery land. The study will serve as a basis for measuring and monitoring of the future impacts. GIDS CONSULTS LTD was procured to undertake the baseline study. The study commenced in December 2012 and a final report is expected in April 2013.

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Capacity development
Government recognises the need to develop human resource capacity to handle the new areas related to refining. A total of six officers have so far trained at Masters Level in Refinery Design and Operations in the UK. Three officers have commenced training at Masters Level in refinery and pipeline related areas in the UK. There is need for capacity building for artisans and technicians who will be required at the construction stage of the refinery. The Ministry plans to engage Uganda Petroleum Institute of Kigumba (UPIK) and other institutions of higher learning to consider incorporation of refining course units in their curriculum.
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Refinery Development Schedule

Governments roles
Feasibility study 2010/2011 Land acquisition Project promotion 2012/2013 Environmental baseline survey Logistics study 2012/2013 Identify developer 2013 FID

2013/2014

Investors roles
EIA FEED
2014 Engineering Procurement Construction 2014/2015 Commission First train 30,000 bbl/d 2016 Expansion 1 60,000 bbl/d 2018 Expansion 2 120,000 bbl/d 2022
Expansion 3 180,000 bbl/d

>2022

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Challenges/constraints
i. Anxiety among the PAPs in refinery land; The residents in the refinery land are very anxious about the planned compensation/resettlement ii. Public anxiety; There is alot of public anxiety regarding the overall refinery development. This is being addressed through sensitisation programmes with relevant audiences such as journalists, Members of Parliament, etc. iii. Misinformation from NGOs; They tell communities that Government is out to grab their land without adequate compensation undermine Government efforts of sensitizing communities iv. Limited expertise in the country; Refining is a new area, and there is therefore need for the industry to develop enmasse capacity among the general public through knolwledge transfer and trainings
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CONCLUDING REMARKS
i. ii. Governments policy is to add value to the crude oil resource discovered in the country and this will be dependent on the confirmation of reserves. The feasibility study for refining demonstrated that the refinery was more viable compared to a crude export pipeline

iii. The growing national and regional petroleum products market provides a significant opportunity for the development of a refinery in Uganda. iv. Government has progressed significantly in the refinery development plans. v. Efforts from different stakeholders to support the development is required given its benefits to the country. vi. Government is prioritising the development of infrastructure required to develop the oil and gas resources discovered in the Albertine Graben. 25

THANK YOU!!

Further Information; COMMISSIONER PETROLEUM EXPLORATION AND PRODUCTION DEPARTMENT pepdebb@petroleum.go.ug refining@petroleum.go.ug www.petroleum.go.ug

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