East Africa

Kenya confirms 2.5% interest in Uganda refinery

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KAMPALA, Uganda – Kenya has confirmed that it will take 2.5% equity shares in Uganda’s oil refinery whose construction tender was awarded to a Russian consortium recently. 

The consortium led by RT Global Resources, was selected for the job after an extended open-bidding international procurement process.

Uganda’s state minister for foreign affairs, Okello Oryem said last week, all East African Community (EAC) partner states were invited by the government to buy shares in the refinery.

“We invited all EAC partner states Tanzania, Rwanda, Burundi and Kenya to buy shareholding in the refinery. This is going to be a regional refinery. It’s only Kenya that has confirmed 2.5% shareholding equity in the refinery project. Other EAC partner states are considering their shareholding,” he said.

Oryem said the Japanese firm, Toyota Tsusho, who were awarded the contract for the feasibility study and preliminary engineering design in November last year are also finalizing their final report which is expected out soon.

The study is Uganda’s capacity for crude oil export and construction of a refined oil pipeline.

Representatives of the consortium also arrived in the country last week, for the “final negotiations and contracts signing,” Oryem said.

RT Global Resources, is a subsidiary of Russian state corporation- Rostec. Others involved are Telconet Capital Limited partnership, VTB Capital PLC, Tatneft JSC, and GS Engineering and Construction Corporation.

Initial estimates show that the cost Uganda’s first oil refinery to be built at Kabaale Village in Hoima (Western Uganda) will be around $3 billion.

South Korea’s SK Engineering and Construction led consortium were named the Alternate Preferred Bidder.

According to the government, 40% of financing will be provided by Uganda, while the winning bidder will be responsible for the 60%.

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-kilometre product pipeline to a terminal in Buloba, about 15kms west of Kampala. The first phase of the refinery is expected to be in place by 2018.

Uganda’s Energy Minister Irene Muloni had promised last month that they will proceed with negotiations on the principle agreements with the RT Global Resources Consortium with an aim of reaching an agreement within 60 days. The negotiations started last week.

Fred Kabagambe Kaliisa, Permanent Secretary in the Ministry of Energy explained that the objective of the negotiations was to conclude the project agreements to the satisfaction of the government and the lead investor.

They include the Project Framework agreements, Shareholder agreements, Implementation agreement and the Escrow agreement.

Upon execution of the different project contracts, the lead investor and Government will constitute a Refinery Company that will take forward the engineering and finalize the financing aspects for the development of the refinery.

If at the end of the negotiations with RT Global Resources, Government is not satisfied that the major issues in the agreement meet its satisfaction, it may exercise its option to commence negotiations with the Alternate Preferred Bidder, a consortium led by SK Engineering and Construction.


By Paul Tentena, Sunday, March 15th, 2015

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