25 September 2016

Uganda in New Search for Refinery Investor

Photo: The East African
(file photo).

Three months after RT Global Resources pulled out of negotiations to construct the oil refinery, government has launched a search for a new investor.

Dozith Abeinomugisha, the Assistant Commissioner in the Ministry of Energy and Mineral Development, says government has restructured the entire oil refinery project and is looking for a new investor.

"Initially, we had a Public Private Partnership, but I think you are all aware, that Rostec [RT Global Resources] has left and now we are looking at restructuring the project to make it public-led instead of private sector-led, so that government takes majority of the shares and the private developer takes a smaller share," Abeinomugisha said.

Abeinomugisha was speaking at the Uganda Chamber of Mines and Petroleum (UCMP) member's annual general meeting at Kampala Serena Hotel last week.

In the previous arrangement, the refinery was to be constructed through a Public Private Partnership (PPP) with a private lead investor contributing 60 percent of the investment while government, and possibly its EAC member states, contributed 40 percent equity. The Tanzanian and Kenyan governments have already expressed interest in taking up 8 and 2.5 percent stake respectively.

"That is the structure we are undertaking but we still need a lead investor who has the technology to build and operate the refinery," Abeinomugisha told the meeting. "So, we are looking for an investor that will partner with government." He was non-committal on whether government will call for fresh bids.

In July this year, after 14 months of negotiations, RT Global Resources, a consortium led by Russia pulled out of negotiations with government as a lead investor for the oil refinery citing several reasons.

Government had shortlisted RT Global as the preferred bidder and another consortium led by SK Engineering of South Korea came second as the alternate bidder. Rostec beat three other bidders in the final round namely Japan's Maruben and China's Petroleum Pipeline Bureau (CPPB).

Government in 2014 started negotiations with RT Resources, but talks broke down in July, after both parties failed to agree on the terms and conditions of sharing responsibilities.

Now, according to Abeinomugisha, the alternate bidder (SK Engineering and Construction) is not interested in any negotiations with government forcing it to re-launch a search for a new investor.

If government succeeds in securing an investor, both parties will form a refining company that will undertake financing, construction and operation of the refinery.

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