Uganda’s Refinery Project Hits Major Setback

Uganda’s Assistant Commissioner in the Ministry of Energy and Mineral Development Dozith Abeinomugisha has said the government is back to the market to look for a new investor after the alternate bidder SK Engineering and Construction backed out following the exit of the preferred lead investor Russia’s RT Global Resources in July.

According to Abeinomugisha Uganda will also restructure the entire oil refinery project from the earlier preferred Public Private Partnership to make it a Public led project where the government will hold the majority share.

The push for a refinery dates back to 2010/11 when Foster Wheeler Energy Limited from the United Kingdom which conducted a feasibility study recommending that the development of 60,000 barrels per day refinery.

Foster Wheeler Energy Limited Ltd said a 60,000 barrels per day refinery was commercially viable with a Net Present Value (NPV) of US$ 3.2 billion at a 10% discount rate and an Internal Rate of Return (IRR) of 33%.

Foster Wheeler Energy Limited Ltd also recommended the size and configuration of the refinery, location, financing options, social and environmental assessment, among others. The current plan is the development of a refinery in a modular manner.

The RT Global Resources led consortium that included Telconet Capital Ltd Partnership, VTB Capital PLC, Tatneft JSC and GS Engineering & Construction Corporation saw negotiations with the Uganda government on issues including: the Project Framework Agreement, Shareholders Agreement, Implementation Agreement and the Escrow Agreement broke down after more than 16 months.

Members of the SK Engineering and Construction led Consortium included SK – KDB Global Investment Partnership Private Equity Fund, China State Construction Engineering Corporation Ltd, Haldor Topsoe A/S and Maestro Oil and Gas Solutions (MOGAS) DMCC.

Over firms that had submitted proposals for the project and had been shortlisted included China Petroleum Pipeline Bureau (CPPB) from China and Marubeni Corporation from Japan.

Two other firms which had earlier showed interest PETROFAC and VITOL SA from the UAE and Switzerand respectively did not submit proposals during the search for a lead investor with the Arab company indicating it had opted to concentrate on their core business in engineering, procurement and construction for the upstream petroleum sub-sector.