Russia taps another firm for consideration in refinery deal

Russia is looking for another homegrown company to finance and construct Uganda’s greenfield oil refinery, following the exit of RT Global Resources, the consortium led by Rostec, a state defence and technology corporation.

Officials familiar with the matter told Uganda Business News that Moscow had proposed the state-owned Safinat Group of Companies, which is also constructing a refinery in neighbouring South Sudan.

But while Russia is “likely” still interested in one of its companies snapping up the refinery tender to expand its investment footprint in Uganda, they are also interested in starting with a small refinery – a proposition Ugandan technocrats are not buying, according to the officials.

Safinat would, under the scaled-down proposal, start with the construction of a 7,000 barrels per day (bpd) refinery complex. This would gradually be scaled up to to government’s 60,000 bpd desirable capacity using revenues realised from the sale of first refined crude oil.

The Russian firm is among the 20 firms said to be in the new race for the refinery project. Uganda had initially chosen a consortium led by Russia’s RT Global Resources as the lead investor in the refinery, but the company pulled out of negotiations in June. South Korea’s SK Engineering & Construction Group which had been retained as alternate bidder also balked.

At the first ministerial meeting of the Uganda-Russian Joint Permanent Commission in October, there were murmurs of RT Global making a comeback, but senior government officials said they had not received any official communication. But should that happen, they (RT Global) would have to go through the new search process, officials said.

Officials said the principle negotiator for RT Global, Rostec, had “failed to negotiate in good faith” and had “failed to execute” a shareholders’ agreement.

Construction of the first phase of the refinery of 30,000 bpd was expected to start in early 2018 and be completed by 2020, paving way to the production of first commercial crude oil.  Another 30,000 bpd phase will be added around 2022, according to government projections.

Whichever investor snaps up the deal, the refinery project will be financed/owned in a public private partnership (PPP) arrangement with government in a 60:40 equity ratio. Other East African countries, as well as French oil major, Total SA, one of the International oil companies operating in Uganda, have expressed interest in financing the project.

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