Oil & gas

Russia Leads Race for Uganda $2.5bn Oil Refinery Deal as China, Japan Quit

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thumb geneva; font-size: small; line-height: 150%;”>This followed the issuance of a Request for Proposals (RFP) for the Uganda Refinery Project during January 2014 with a submission deadline of 30th May 2014.

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“The RFP required the submission of a Bid Bond, and detailed technical, financial and commercial plans to develop, finance, build and operate the Project in partnership with the GOU, among other requirements. The bidders were also required to review and comment on draft Principal Project Agreements,” said Kabagambe-Kaliisa, Permanent Secretary of the Ministry of Energy and Mineral Development (MEMD) on Wednesday.


Observers will understand this new development as a huge leap forward in the commercialisation of the oil sector.


Chimp Corps say the Energy Minister, Irene Muloni this month expressed hope that the oil pipeline investor would be named as early as July.


The two bidders that have been invited to progress to the next stage of the tender process are; SK Group led Consortium (South Korea) and RT Global Resources led Consortium (Russia).


The proposal from Marubeni Corporation was not evaluated due to lack of a bid bond as required by the RFP, while China Pipeline Petroleum Bureau’s proposal did not adequately satisfy all the requirements of the RFP.


It was hugely expected the Chinese consortium, China National Offshore Oil Corporation (CNOOC), would scoop the deal given the blossoming relations between Kampala and Beijing.


However, for strategic reasons, Uganda could be trying to balance its interests in the East by opening up to Russia considering that China has already taken the deal to construct the railway line from Mombasa through Uganda to Kenya.


This implies RT Global Resources could take the multi-billion dollar oil refinery deal.


The Russian corporation 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.


It should be noted that Russia and China recently signed oil and gas deals worth billions of dollars amid isolation by the west in the wake of the Ukraine crisis.


It is also possible that Russia and China could have found a neutral ground in the competition for the oil refinery.


Evaluation


Officials said the evaluation was conducted during June 2014 by a team comprising of representatives of Government of Uganda supported by the Government’s Transaction Advisor, Taylor –Dejongh.


Kaliisa said government will commence negotiations with the two preferred bidders and thereafter issue a request for the Best and Final Offers (“BFO”) document.


“The two consortia will be expected to submit their respective Best and Final Offers by the end of August 2014. Government will then negotiate the Principal Project Agreements with the highest scoring Preferred Bidder and once executed, take forward the development of the project”, Mr. Kaliisa added.


Uganda’s refinery project is to be established under a public private partnership (PPP) arrangement with the Government holding up to 40 percent equity.


It involves development of a refinery with a capacity of 60,000 BPD, development of crude oil and product storage facilities on site, as well as a 205-kilometer product pipeline to a terminal near Uganda’s capital city of Kampala.


The first phase of the refinery is expected to be in place by 2017/2018.


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.

Overview

The proposed Uganda Refinery Project will be constructed in Hoima, western Uganda, and is anticipated to have a capacity of 60,000 BPD.

Crude oil for the refinery will be procured from the fields under development by the Upstream Consortium comprised of CNOOC, Total SA and Tullow Oil.

The refinery will produce diesel, petrol, kerosene, jet fuel, liquefied petroleum gas (LPG) and heavy fuel oil (HFO).

Ugandan oil resources are a significant feedstock for a domestic refinery as this would be the nation’s first refinery.

There are approximately 3.5 billion barrels of oil (of which 1.2-1.7 billion is commercially recoverable) and 350 billion cubic feet of gas.

Uganda’s Parliament enacted the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act in February 2013, providing the framework for the development of the downstream petroleum sector in Uganda, including the Refinery Project.

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