Govt Opts for South Korean Firm as Russians Abandon Oil Refinery Deal Top story

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Dr F.A. Kabagambe-Kaliisa, the Permanent Secretary in the Ministry of Energy says that although the final agreement was reached in principle in May this year, the RT-Global Resources Consortium made additional demands from the Government, seeking to reopen and renegotiate issues that had already been agreed between the parties. The demands were made days prior to the expected signature date at the beginning of June 2016.

Government is engaging SK Engineering and Construction, a consortium from the Republic of South Korea, for negotiations on the construction of the 4billion US Dollar Greenfield oil refinery in Hoima, the Ministry of Energy has said.

This' after reports indicating that the preferred bidder; a consortium led by RT Global resources, a subsidiary of Russian State Corporation- ROSTEC, walked away from the deal under unclear circumstances. The energy ministry however says the negotiations were halted by the Ugandan government after a disagreement.

SK Engineering and Construction and RT Global resources, were the two final bidders evaluated last year by a team from the government and Taylor DeJongh, government's transaction advisor. SK Engineering and Construction was named the Alternate Preferred Bidder.

Following their endorsement, government proceeded with negotiations on the principle agreements with the RT Global Resources Consortium. The negotiations mainly seek to conclude the project agreements to the satisfaction of the government and the lead investor.  These include the Project Framework agreements, Shareholder agreements, Implementation agreement and the Escrow agreement.

Government had estimated to reach an agreement with the investor within 60 days.  However, they took close to 14 months before talks were suspended.

Dr F.A. Kabagambe-Kaliisa, the Permanent Secretary in the Ministry of Energy says that although the final agreement was reached in principle in May this year, the RT-Global Resources Consortium made additional demands from the Government, seeking to reopen and renegotiate issues that had already been agreed between the parties. The demands were made days prior to the expected signature date at the beginning of June 2016.

Kaliisa says that consequently, government was left with no choice but to halt negotiations and draw the bid bond.

The Project involves development of a refinery with a capacity of 60,000 barrels per day, development of crude oil and product storage facilities on site, as well as a 250-kilometer product pipeline to a terminal in Buloba, about 15kilometers west of Kampala. The First phase of the refinery is expected to be in place in 2018.

Preliminary estimates suggest the cost Uganda's first oil refinery to be built in Hoima will be around 4 billion US Dollars. According to the tenders, 40 percent of financing will be provided by the Government of Uganda, while the winning bidder will be responsible for the remaining 60 percent.

More than 60 companies had in 2013 shown interest as potential investors for refinery. Six of these were shortlisted in 2014, four of which submitted detailed proposals to the Government of Uganda (GOU) for the role of Lead Investor/Operator for the development.

They include consortia led by the China Petroleum Pipeline Bureau (CPPB), Marubeni Corporation from Japan, the subsidiary of Russian State Corporation-ROSTEC, RT - Global Resources and SK Group from South Korea.
 
Uganda's oil Resources are now estimated at 6.5 billion barrels of oil initially in place from the 21 oil and gas discoveries made in the country to date. Less than 10 percent of the Albertine Graben is currently licensed and plans to hold the country's first competitive licensing in the course of the year 2015.

 

About the author

Sylvia Nankya
Sylvia is an Editor and Media Trainer with Uganda Radio Network. She has been a URN staff member since 2013. Sylvia has previously worked as a reporter and news anchor with Radio One (2001-2009) and with Vision Group (2009-2011). Six of her active years in Journalism were spent covering the Parliament of Uganda.

Over the past few years, Sylvia has worked to promote the positive development of societies recovering from conflict through training journalists on choices of stories, how they report issues and use of appropriate language in covering conflict and post-conflict situations.

She is an Alumni of RNTC- Holland, Les Aspin Centre for Government at Marquette University-WI, USA and a Community Solutions Fellow.