11. Uganda’s Oil Refinery: Gauging the Government’s Stake
- Author:
- Paul Bagabo and Thomas Scurfield
- Publication Date:
- 01-2024
- Content Type:
- Policy Brief
- Institution:
- Natural Resource Governance Institute
- Abstract:
- Uganda’s planned oil refinery will have several benefits for the country, including for its security of fuel supply and balance of payments. The refinery could be reasonably profitable, generating an internal rate of return of 13 percent in a baseline scenario. The government is planning to take a 40 percent stake but may ultimately pay a higher price for this equity than it expects. Even if it borrows to cover its upfront contribution to costs, it will need to divert around $330 million in present value terms from the national budget for loan repayments in the 2030s. This price will increase if downside risks, such as cost overruns or lower global oil prices, materialize. The government can take several steps to increase interest from other investors, including by reducing the risk of cost overruns, ensuring deregulated product prices continue, and providing less risky forms of state support such as tax incentives. These should reduce the need for the government to take a large stake.
- Topic:
- Oil, Regulation, and Investment
- Political Geography:
- Uganda and Africa