Proposal for government to borrow up to USD 456.37 million from China Export and Import bank to finance the upgrade and construction of the National Oil Roads
Today 16th of May 2019, Hon. David Bahati presented a motion before parliament for its authorization as required under Article 159 of the Constitution, to allow the Government to borrow up to USD 456.37 million from the Export-Import Bank of China for the Upgrade and Construction of National Oil Roads under three packages 1, 2 & 3.
The Minister told the house that the discovery of crude oil in the eastern shores of Lake Albert had given Uganda great possibilities of boosting its economy through oil extraction. He noted that the Government of Uganda and its other Partners through the Lake Albert Basin Development Committee (LABDC) had set a target to extract oil by 2020. In order to achieve this target, he reminded the house that key enabling infrastructure, such as road network, ought to be in place. Accordingly, the Government together with the oil partners had identified oil roads required to be upgraded in order to achieve the 2020 target.
He further highlighted that the government wished to borrow the USD 456.37 million to finance the Upgrade and Construction of the following National Oil Roads:
- Masindi-Park function and Tangi Junction-Paraa Bulisa Road;
- Hoima- Butiaba-Wanseko to Pavel Standard; and
- Buhimba-Bulamagi and Bulamagi-Igayaza-Kakumiro Roads.
In his remarks, the Minister pointed out the China Exim Bank would only cover 85% of the commercial contract for each package and therefore Government would finance 15% under each package. The requested borrowing of USD 456.37 million therefore sought to cover only 85% of the contract amount including the required insurance from SINOSURE.
He observed that the existing roads were predominantly gravel, narrow, swampy, and are structurally noncompliant to the kind of traffic envisaged that the oil sector would be adding during their operations. This poses a huge logistics challenges to the oil production timelines yet those project roads had been earmarked as key access roads required for constructing the East African Community Oil Pipeline and the Refinery in Hoima. The existing roads also suffer from excessive flooding during the wet season and have a series of both permanent and seasonal long swaps.
In his concluding remarks, the minister reiterated that the overarching goal of the Government of Uganda was to develop transport infrastructure required to support oil development and other strategic priorities of the country. Therefore, these calls for improvement of the regional transport network to facilitate freight for oil industry logistics and evacuation of oil products for export. In his view, if large benefits were to be reaped from Uganda’s oil and gas resources, the development of Uganda, the transport infrastructure network is a critical factor that will be necessary for the successful execution of planned logistics and early activities, as well as the early export of oil product.