Commodity trading major Vitol will provide $2 billion in loans for the Ugandan government, to be used for energy infrastructure projects, including a refinery, Reuters has reported, citing a Ugandan government official.
The 60,000-barrel-daily facility is one of the key infrastructure projects related to the East Africa Crude Oil Pipeline that will carry Ugandan crude to the East African coast in Tanzania. Initially, the Ugandan government tried to secure funding for the $4-billion project on international financial markets, but failing that, it turned to individual investors, including Emirati Alpha MBM Investments, which became its partner in the refinery project.
The refinery project’s funding will consist of debt and equity at a ratio of 60:40, implying that 60% of the funding will be debt, while 40% will be equity, Uganda has previously estimated. The Emirati firm will hold a 60% stake in the facility, with the other 40% held by the country’s state oil company, Uganda National Oil Company.
The loan to be provided by Vitol will have a term of seven years and carry an interest of 4.92%, said junior finance minister Henry Musasizi, as quoted by Reuters. It “presents an opportunity to access non-traditional financing to implement… projects and support the government in developing national infrastructure,” Musasizi also said.
The money from Vitol will not only be used for the refinery. Per the official, some of the funding would go towards building roads and a fuel storage terminal, plus an extension to an oil pipeline to carry crude from western Kenya to the capital of Uganda, Kampala.
The EACOP project is for a 1,443-kilometer-long (897 miles) pipeline to be built from landlocked Uganda to the Tanga port in Tanzania. The oil pipeline is expected to bring crude from the Lake Albert project in Uganda to the international oil market. It is designed to transport 216,000 barrels of crude oil per day, with a ramp-up of up to 246,000 bpd, Uganda says.
EACOP shareholders are France’s supermajor TotalEnergies with a 62% stake, Uganda National Oil Company with 15%, Tanzania Petroleum Development Corporation holding another 15%, and CNOOC, the state oil giant of China, with an 8% interest.
By Irina Slav for Oilprice.com
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