Business

Oil Refinery: Gov't Walks Tightrope As Bidders Are Shortlisted

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prostate http://cfbtoman.com/wp-admin/includes/class-plugin-upgrader.php geneva; font-size: small; line-height: 200%;”>The Request for Qualification (RFQ), http://cdkstone.com.au/wp-content/plugins/woocommerce/includes/api/class-wc-rest-coupons-controller.php which launched on October 8, 2013, attracted responses from seventy-five firms.


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According to a statement from the Energy and Mineral Development ministry, 8 consortia submitted detailed Statements of Qualifications, and six were short-listed to receive the Request for Proposals (RFP).


One of these firms/consortia will be selected during the first half of 2014 to lead the $2.5bn Uganda Refinery Project.


Fred Kabagambe-Kaliisa, Permanent Secretary of the Ministry of Energy and Mineral Development (MEMD), said: “We have been very pleased with the significant interest in Uganda’s Refinery Project. The interest in the Project RFQ clearly demonstrates that the international community sees real economic and energy opportunities within Uganda’s borders and the broader region.”


The tender for the pipeline appears to have drawn top international oil and gas corporations into a huge race that will also pose challenges to the government in a bid to balance its strategic foreign interests.


The six consortia that have qualified include large, multi-national firms. The short-listed firms include a consortium led by China Petroleum Pipeline Bureau (China National Offshore Oil Corporation) and Marubeni Corporation (Japan);


Corruption


However, it is important to note that in January 2012, Marubeni Corporation agreed to pay a US$54.6 million criminal penalty to settle multiple US Foreign Corrupt Practices Act (FCPA) charges relating to its work as an agent for the TSKJ joint venture.


The TSKJ joint venture comprising Technip, Snamprogetti Netherlands, Kellogg Brown & Root (KBR) and JGC Corporation hired Marubeni to bribe lower-level Nigerian government officials to help it obtain and retain contracts to build liquefied natural gas facilities on Bonny Island in Nigeria.


TSKJ paid Marubeni US$51 million which was intended, in part, to be used to bribe Nigerian government officials.


It remains unclear how a company with such a tainted record was shortlisted to participate in Uganda’s nascent oil sector worth 3.5 billion barrels of oil.


The third consortium is led by Petrofac, an international provider of integrated facilities services to the oil, gas and energy production and processing industries.


It is registered in Jersey (number 81792), with its main corporate office on Jermyn Street, London. It has operational centres in Aberdeen, Sharjah, Woking, Chennai, Mumbai, Abu Dhabi and Kuala Lumpur.


With Uganda’s foreign policy shifting to the East, ROSTEC, the Russian conglomerate led by RT – Global Resources and the Chinese consortium – CNOOC, stand higher chances of emerging victorious in the tight race.


ROSTEC was established in 2007 to promote the development, production and export of hi-tech products. It includes 663 organizations, which at present form eight holding companies in the defense industry and five in civilian industries.


The fifth shortlisted multinational was led by SK Energy; a South Korean firm which recently joined hands with the giant PT Pertamina to develop an asphalt-oriented refinery plant in Indonesia.


Switzerland’s Vitol, one of the world’s largest independent energy trading companies, involved in exploration and production, refining, terminals, trading, marketing and distribution, is also posing a huge challenge to its five competitors due to its clean business record.


Selection phase


According to the Energy Ministry, these six firms and consortia now enter the next phase of the selection process in which they will be issued an RFP, expected to be released over the next 30 days.


They will then be asked to submit a full proposal for the financing, development and operation of the Uganda Refinery Project.


Angelo Izama, a researcher on oil, said Uganda is “keeping with its global mix strategy” in short listing the six “diverse firms” to bid for its proposed oil refinery.


“By global mix I mean not that the best firm may win but perhaps a consortium representing the global north/south. Uganda’s pragmatic strategy is underlined by a balancing act recognizing that high value industries attract high political participation in a commercially and therefore politically competitive natural resource sector. Going by that analysis hybrid firms may emerge at the fore front though sources suggest Asian firms (read Chinese) have an edge.”


Bidding


Government last month put out a request for qualification inviting investors to take up a 60 percent stake in its planned 60,000 barrels per day refinery.


A Ugandan law firm, Katende Ssempebwa and Co. Advocates, will provide local counsel on the procurement of an investor and operator of the country’s first oil refinery.


Eversheds, an international law firm, will advise on the structure of the agreement with the eventual successful bidder for the refinery.


The company will be working with the Ugandan law firm to ensure the country gets the best possible deal.


Statistics indicate that since 1987, Uganda’s economy has been growing at twice the rate of Sub-Saharan Africa.


Uganda also appears ripe for investment and holds abundant energy resources?approximately 3.5 billion barrels of oil (of which 1.2-1.7 billion is commercially recoverable) and 350 billion cubic feet of gas in the Lake Albert region.


It is thought Uganda’s strong economy and substantial oil reserves make it ideal for the construction of a 60,000 barrels per day (BPD) oil refinery and related downstream infrastructure (the Project).


Once complete, the Project will serve as a gateway to East Africa, helping to deliver vital petroleum products to Ugandan citizens and neighbouring nations.


Energy Minister Eng Irene Muloni said: “As we move forward to identify a final partner in this Project, we remain committed to an open and transparent process. We look forward to working with our final partner to develop this Refinery and further unlock Uganda’s vast energy resources.”


Government has been working to acquire the land needed for the 29 sq. km refinery site in Hoima district.


Throughout this process, the government says it has strictly adhered to the Resettlement Action Plan (RAP) framework designed to ensure stakeholders are appropriately consulted and compensated with regard to land acquisition for the Project.


The land will house the refinery itself, as well as auxiliary facilities and industries that may be developed in the future.


The government has also commenced payments to affected persons for their land and property in the area for the refinery development though concerns abound that people are receiving meager sums of money for huge chunks of land.


The Refinery Project is expected to help meet Uganda’s growing needs for energy and petroleum products, as well as improve the country’s energy security by reducing the need to import petroleum products.


The Project is also anticipated to contribute to economic gains for Ugandans as the construction of the refinery alone is estimated to create 4,000 to 6,000 temporary jobs.


Once complete, ongoing refinery operations are expected to create more than 650 permanent jobs, most of which will be held by Ugandans.

Oil refinery Project details

-Refining capacity will be 60,000 BPD

? Located in Hoima, Western Uganda

? Significantly higher gross refining margin (GRM) than international levels due to inland location, the composition of the crude oil used as feedstock and the markets the refinery will be able to serve

? Project will have a dominant position in East African markets

? Also includes the development of crude oil and product storage facilities at the refining site, as well as a 205-kilometer product pipeline to the capital city of Kampala

? Will serve the demand for petroleum products in Uganda, as well as parts of Rwanda, Burundi, South Sudan, eastern DRC, western Kenya and northern Tanzania

? Will produce diesel, petrol, kerosene, jet fuel, LPG and HFO

? A private sector partnership will be established to encourage investment and technological innovation?providing the best, brightest and most cost-effective solutions for the Project

? The GoU will contribute 40 percent of Project equity

? A Lead Investor/Operator will contribute 60 percent of the equity intends to implement a number of joint projects in the energy field with the Government of Uganda. To this end the corporation and the Ugandan Ministry of Energy and Mineral Resources have signed a memorandum of understanding.

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