PLANS by Uganda to build an oil refinery is not a threat to Kenya Pipeline, management has affirmed, as the company’s privatisation takes shape amid regional expansion plans.
Dubai-based investment firm Alpha MBM Investments LLC and Uganda National Oil Company (UNOC) have signed a key agreement on the $4billion (Sh516 billion) project which is now advancing towards a Final Investment Decision, expected by July this year after more than a decade of delays.
The refinery, planned for the Albertine Graben, is designed to process up to 60,000 barrels of crude oil per day once completed, with Uganda keen to cut its $2 billion (Sh 258 billion) annual petroleum products import bill mainly imported through Kenya.
The UAE firm will hold a 60 per cent equity stake with UNOC retaining 40 per cent, according to the Uganda Investment Authority.
The arrangement follows years of unsuccessful negotiations with previous partners and is being presented by Kampala as evidence of renewed investor confidence in the country’s oil sector.
The refinery is expected to be completed in 2029-30 and if this materialises, it would pose a significant risk to Kenya Pipeline Company (KPC) in terms of its regional expansion strategy, which includes the planned Eldoret-Kampala-Kigali refined petroleum products pipeline project, aimed at easing product movement.
Kenya Pipeline managing director Joe Sang has however allayed fears that Uganda’s move will affect the Kenya’s petroleum industry, even as the sale of the government stake in the company opens to the public and investors amid the planned regional expansion by the company.
“Uganda refinery is not a threat, it will take up to 15 years for Uganda to start refining oil,” Kenya Pipeline managing director Joe Sang said during a media briefing on the Initial Public Offer (IPO) in Nairobi.
Kenya Pipeline has put on offer 11.81 billion ordinary shares for sale through its IPO, priced at Sh9 per share, representing a 65 per cent stake in the company. The offer opened on January 19, 2026 at 9am and will close on February 19 at 5pm.
The sale of the government’s stake by National Treasury is expected to raise about Sh106.3 billion which will be channeled into the country’s spending as the government seeks to cut on borrowing for development projects.
Kenya Pipeline also plans to spend at least Sh110 billion on capacity expansion initiatives aimed at supporting future growth.
These includes the new eastern pipeline from Mombasa to Nairobi, Eldoret-Malaba-Kampala pipeline, Nairobi LPG storage facility, crude oil storage in Mombasa, replacement of near obsolete ERP system and commercialisation of lite Fibre optic cable.
“The investments are expected to be funded through a combination of internally generated cash flows and innovative financing structures including access to debt capital markets, SPV project financing, joint ventures and partnerships among others,” the IPO information memorandum states.
Uganda is the largest transit market for petroleum products managed by KPC, receiving about 90 per cent of its refined petroleum (approximately 2.5 billion liters annually).
This is via the Port of Mombasa and the KPC pipeline network which delivers products in Eldoret and Kisumu depots for onwards transportation by tankers and Lake Victoria.
There have been a few major oil discoveries in the region in the recent past. South Sudan is said to be sitting on 18 billion barrels of oil reserves and Uganda on six billion. Uganda is still keen on refining its own oil to satisfy its domestic market.
The East Africa Crude Oil Pipeline project running from Kabaale, Hoima District in Uganda to the Port of Tanga in Tanzania is also at advanced stages with completion set for this year.
KPC which purely deals in refined products transportation is however confident that the region will continue to importing refined products for the “foreseeable future.”
“Even when refining capacity becomes a reality, world oil markets are fully integrated, meaning there is no regional markets for oil, all oil competes in the world oil markets on the basis of its production and scale economics.”
“It will take a long time for the Eastern African regional market consumption levels to justify crude refining scale and margins at the best world oil markets level,” it said.
The East Africa midstream industry has shown a moderate degree of concentration. Major state-owned players such as KPC, Tanzania Petroleum Development Corporation (TPDC), and Uganda National Oil Company (UNOC) control transportation and storage, effectively forming national or corridor-based monopolies and duopolies.
Innovation within the sector is primarily focused on infrastructure expansion, system integrity and cost-efficient transport solutions rather than disruptive technological change.
by MARTIN MWITA
