LONDON, U.K. ( July 30, 2013) – Plans to develop two East African refineries following a forecasted rise in demand for refined products could potentially strengthen relationships between some of the region’s countries, says an analyst with research and consulting firm GlobalData.
According to industry forecasts, demand for aggregated refined products in East Africa is expected to increase from its current estimated level of 75 mbd (thousand barrels per day) to 150 mbd by 2025, leading to plans for the construction of a new refinery in Uganda and the upgrade of an existing refinery in Kenya.
In Uganda, government negotiators and three international oil companies – Ireland’s Tullow Oil, France’s Total and China National Offshore Oil Corporation (CNOOC) – have already established a framework agreement for the construction of a 30 mbd refinery in Hoima, which will process some of the output from the country’s crude oil discovery in Lake Albert.
Jeffrey Kerr, GlobalData’s Managing Analyst covering Downstream Oil & Gas, says: “The plans to position this new refinery near the fields where the oil will be sourced means that it will be in a prime location to serve not only the refined product needs of Uganda, but also those of Congo, Rwanda and Burundi.”
Meanwhile, with the Kenya Petroleum Refinery Limited (KPRL) plant in need of an upgrade due to sustained neglect, its joint owners KPRL and India’s Essar Petroleum are negotiating a $1.2 billion financing agreement, which will be used to add more sophisticated hydrotreating units to the refinery and increase atmospheric distillation to 70 mbd, among other improvements.
To aid the potential success of these projects, the governments of Kenya, Uganda and Rwanda signed a Memorandum of Understanding to provide funding for a pair of pipelines that could transport crude oil and refined products through their countries.
The crude oil pipeline would originate in South Sudan and pass through Uganda, Rwanda and Kenya en route to Lamu, providing a passage for Uganda to transport its crude oil to market, while the proposed refined products pipeline would begin in Mombasa and follow a similar route, further linking Kenya, Rwanda and Uganda together.
Kerr concludes: “Following the latest crude oil discoveries in the region, there is a need to build infrastructure such as refineries, terminals, pipelines and ports, and this seems to be bringing the countries of East Africa closer together and allowing them to work in collaboration to discuss new solutions for fulfilling the increasing demand.”
Comment provided by Jeffrey Kerr, GlobalData’s Managing Analyst covering Downstream Oil & Gas.
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