Uganda taps Russian firm to build country’s first refinery
The government of Uganda has selected a consortium led by Russia’s RT Global Resources, Moscow, as its first choice to construct the country’s first refinery (OGJ Online, Dec. 2, 2013).
The contract award follows a government evaluation of final bid packages submitted in January by consortia led by RT Global Resources and South Korea’s SK Engineering & Construction Co. Ltd., Seoul, both of which Uganda previously selected as its two preferred bidders from a pool of international companies contending for the project, Uganda’s Ministry of Energy and Mineral Development (MEMD) said (OGJ Online, June 24, 2014).
Starting in March, the government will resume negotiations with RT Global Resources and partners Telconet Capital Ltd., VTB Capital PLC, JSC Tatneft, and GS Engineering & Construction Corp., with a goal of reaching a final project agreement within 60 days, MEMD said.
The March negotiations will include finalizing details related to the project framework agreement, shareholders agreement, implementation agreement, and escrow agreement, said Fred Kabagambe-Kaliisa, MEMD’s permanent secretary.
Engineering and final investment decisions for the project’s development will take place once the government and RT Global Resources have concluded final contract negotiations, MEMD said.
Undone deal
While Uganda hopes to advance construction of the refinery with RT Global Resources, a subsidiary of state-owned Rostec Corp., selection of the Russian firm’s consortium as the country’s preferred bidder hinges upon the outcome next month’s negotiation process.
Should the government and RT Global Resources be unable to resolve major issues over project agreements by the end of negotiations, MEMD said that Uganada does retain an option to begin negotiations with the SK Engineering & Construction-led consortium, which includes SK-KDB Global Investment Partnership Private Equity Fund, China State Construction Engineering Corp. Ltd., Haldor Topsoe AS, and MOGAS DMCC.
“The SK Engineering & Construction-led consortium has been a strong competitor throughout the selection process leading to the final offer; however, they came short on [some of the government’s key requirements], including contribution to the private share and operating plan,” said Kabagambe-Kaliisa.
The project
The proposed 60,000-b/d refinery, to be built in the Lake Albert region of Buseruka Subcounty in Uganda’s Hoima District, will be developed in two 30,000-b/d phases and include on-site crude oil and product storage, as well as a 205-km product pipeline to a distribution terminal near Kampala (OGJ Online, June 4, 2014).
Uganda will hold 40% equity in the project, while the winning bidder, as lead investor and operator, will hold the remaining interest.
The refinery will be designed to process Uganda’s waxy crude oil (23-33° API, 0.16 wt% sulfur) produced from the Albertine basin to serve petroleum product markets in Uganda, Congo (former Zaire), South Sudan, Rwanda, Burundi, Kenya, and Tanzania.
While less than 10% of Albertine Graben, Uganda’s most prospective sedimentary basin, is licensed currently, the country plans to hold its first competitive licensing round during 2015, MEMD said, adding that Uganda’s oil resources now stand at about 6.5 billion bbl initially in place from the 21 oil and gas discoveries made to date.
RT Global Resources previously said it would invest no less than $1 billion into building the refinery’s first 30,000-b/d phase, according to a January 2014 release from the Russian firm.
As of early 2014, estimates showed capital costs for construction of the entire refinery, including the pipeline and related infrastructure, at about $3 billion, RT Global Resources said.
The refinery’s first phase remains on schedule to be commissioned in 2018, with the plant due to reach its full 60,000-b/d capacity by 2020, according to MEMD and RT Global Resources.
Contact Robert Brelsford at [email protected].
