Parliament approves UNOC’s UGX 7 trillion loan from Vitol Bahrain to fund oil refinery, Kenya pipeline shares and storage facilities Uganda National Oil Company will use the Vitol-backed facility to kick-start refinery construction, buy into Kenya’s pipeline network and build roads critical to oil logistics.

Parliament has approved a proposal authorising the Uganda National Oil Company (UNOC) to borrow up to USD 2 billion (UGX 7.12 trillion) from Vitol Bahrain E.C. (VBA), a global trader in crude oil and petroleum products supply and marketing.  

The financing marks a decisive shift toward non-traditional financing to unlock oil-linked and national infrastructure projects amid tightening global capital for fossil fuel investments.

The proposal presented by the Ministry of Finance in its capacity as a shareholder in UNOC  builds on an existing commercial relationship between UNOC and Vitol Bahrain.

 In August 2023, Government, through UNOC, entered into a Petroleum Products Supply Agreement with Vitol, appointing the firm as Uganda’s sole importer of petrol, diesel and aviation fuel. 

UNOC and Vitol commenced sole importation operations in July 2024, and by December 2025, the arrangement had achieved its core objectives of supply stability and competitive pricing while generating net profits of up to USD 150 million, equivalent to UGX 534.15 billion, for UNOC. 

In May 2025, the two parties signed a Memorandum of Understanding to explore financing cooperation for UNOC projects and other critical government infrastructure, laying the groundwork for the current proposal. 

The current USD 2 billion  facility will be borrowed by UNOC, with repayment supported through capitalisation by the Ministry of Finance over the repayment period. 

The Finance Ministry also sought Parliament’s approval for UNOC to contract the loan, approve capitalisation of the company during repayment, and sanction the establishment of escrow-based revenue security mechanisms that will underpin the facility over its full tenure.

The loan carries a tenure of 84 months (seven years), inclusive of a 24-month grace period, during which no interest payments will be made. Instead, interest accruing during the grace period will be deferred and capitalised.

The interest rate on the facility is pegged to the three-month Secured Overnight Financing Rate (SOFR), currently at 3.92 per cent, with an additional one per cent margin, bringing the effective interest rate to 4.92 per cent. 

The facility carries no additional fees, a structure the Finance Ministry argues is competitive given prevailing global credit conditions for oil-related investments.

Following the expiry of the two-year grace period, Government will capitalise UNOC to enable loan repayment.

 Under the agreed repayment profile, UNOC will pay USD 100 million (UGX 356.1 billion) in principal plus interest every quarter, calculated only on amounts actually utilised. 

The repayment details are set out in an amortisation schedule attached to the parliamentary brief as Annex I, and repayment obligations will run through the remaining life of the facility.

The financing is intended to fund a carefully defined investment programme split between petroleum infrastructure under UNOC and national roads infrastructure critical to oil logistics and economic growth. 

Of the total facility, USD 1.2 billion, equivalent to UGX 4.27 trillion, will be allocated to UNOC-led projects across the petroleum value chain. 

These include the development of the Kampala Storage Terminal, enhancement of the pipeline jetty and associated terminal facilities at Jinja Storage Terminal, and the acquisition of petroleum storage facilities in Mombasa to handle gasoil through the purchase of an existing terminal. 

The funding will also cover at least the first year of construction of the Uganda Oil Refinery, the acquisition of shares in the Kenya Pipeline Company, and the extension of the finished products pipeline from Eldoret to Kampala, positioning Uganda to strengthen its control over regional fuel logistics and reduce long-term supply risks.

Uganda’s government, through UNOC, has partnered with UAE-based Alpha MBM Investments to build a USD 4 billion, 60,000-barrel-per-day oil refinery in Kabaale, Hoima District. Under a March 2025 agreement, Alpha MBM will hold 60% of the project while UNOC retains 40%. 

The refinery, expected to begin operations in late 2029 or early 2030, is a cornerstone of Uganda’s oil development strategy, aiming to boost energy independence, support industrial growth, and create a broader ecosystem producing fuels, petrochemicals, and fertilizers.

The 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. 

Kenya also recently invited Uganda and other East African entities to participate as shareholders in Kenya Pipeline Company by selling up to a 65% stake through an IPO on the Nairobi Securities Exchange, while retaining a 35% strategic shareholding. An IPO is targeted for completion by March 31, 2026.

In addition to the UNOC investments, USD 800 million, equivalent to UGX 2.85 trillion, will be deployed to finance national roads infrastructure projects. 

According to the Finance Ministry, these roads are essential to supporting Uganda’s oil and gas development strategy, facilitating movement of petroleum products across the country and easing pressure on the Consolidated Fund, which would otherwise have been required to finance the projects over the next five years.

To secure the facility, UNOC will establish Rules Based Accounts (RBAs) in international banks operating in Uganda. 

Under the agreed conditions, all revenues derived from projects financed by the loan will be deposited into escrow accounts designated as Projects RBAs. 

In addition, UNOC will pay into Domestic Product Accounts all proceeds from the sale of finished petroleum products to oil marketing companies operating in Uganda. 

The petroleum proceeds and project revenues flowing through these accounts will act as security in the event of default on loan repayments, remaining in place for the entire seven-year term of the facility. 

Parliament was also asked to approve both the opening and operation of these accounts, as well as the use of funds deposited in them in line with the loan conditions.

The facility also contains several structural features that add flexibility to the arrangement. 

Cashflows from UNOC projects funded by the loan will be deposited as security up to an agreed minimum amount throughout the loan term. 

The agreement provides an option to increase the loan amount subject to mutual consent, and allows utilisation of the facility over a period of up to five years after execution, enabling phased drawdowns aligned with project implementation schedules.

Government’s justification for the loan is anchored in projected returns and fiscal impact. 

According to the parliamentary brief, once implemented, the projects financed under the facility are expected to generate revenues of up to USD 5.6 billion, equivalent to UGX 19.94 trillion. 

These revenues will be in addition to those expected from Uganda’s upstream oil sector. 

The Finance Ministry argues that the projects, which have already been approved by UNOC’s Board and Cabinet, would otherwise have required direct government funding through the Consolidated Fund, increasing public debt pressures. 

The loan is therefore presented as a mechanism to ease the debt burden, accelerate project execution and enable quicker realisation of revenues.

The proposal is rooted in UNOC’s expanding mandate beyond upstream participation. 

In addition to its sole fuel importation role, UNOC is now engaged across the petroleum value chain, including storage development, pipeline infrastructure, refinery preparation and regional logistics investments. 

These initiatives are aligned with Government’s broader strategy to deepen value addition, secure supply chains and strengthen Uganda’s strategic position in East Africa’s petroleum market..

The Finance Ministry noted that the broader context for the financing is the global energy transition that has reshaped capital flows since the signing of the Paris Agreement at COP21 in December 2015. 

Global policy shifts, climate activism and tightening ESG standards have driven capital away from traditional petroleum investments, making financing increasingly expensive and difficult to secure. 

The Finance Ministry also noted that Uganda’s oil sector has not been insulated from these pressures, with even flagship projects such as the East African Crude Oil Pipeline encountering financing challenges despite maintaining high environmental and social standards and attracting investment from internationally recognised companies including TotalEnergies and CNOOC. 

On a related note, the East African Crude Oil Pipeline (EACOP) secured significant funding from African and regional banks, including the African Export-Import Bank (Afreximbank), Standard Bank (SA), Stanbic Bank Uganda, KCB Bank Uganda, and the Islamic Corporation for the Development of the Private Sector (ICD), marking a major milestone for the USD 5 billion project, especially after some Western banks withdrew due to climate concerns.