America’s General Electric (GE) and Italy’s Saipem SpA from Italy will likely build Uganda’s proposed oil refinery in Hoima district after a Cabinet meeting on Wednesday evening cleared the two companies for the $4bn tender.
Sources knowledgeable of the meeting proceedings told this website that the decision was premised on recommendations of Uganda National Oil Company executives and the need to “balance foreign interests” in Uganda’s oil sector.
Already, the upstream sector has the likes of China’s Cnooc, France’s Total SA and UK’s Tullow Oil PLC (which is on its way out). Two new companies, Australia’s Armour Energy and Nigeria’s Oranto Petroleum were issued exploration licenses late last year.
General Electric and Saipem joined hands with Intra-continental Asset Holdings (IA), a Mauritius based private equity fund, and Yaatra Ventures LLC, which is based in Washington DC.
The race for the multibillion-dollar deal was between the GE-led consortium and China’s Guangzhou DongSong Energy Group venture. But last October GE officials flew into the country and held discussions with President Museveni, one of the tell-tale signs that the consortium had an upper hand.
This website understands that the GE-lED venture was evaluated second with a score of 66% during the due diligence exercise. DongSong was evaluated as the best bidder with an overall score of 83%.
Besides the “need to balance foreign interests”, sources familiar with the deal told this website that claims that the Chinese consortium bribed some members on the due diligence team worked in its disfavour.
That aside, DongSong had offered Uganda a good deal for the refinery, our sources said, including presenting a letter from the Industrial and Commercial Bank of China Limited (ICBC) – a large Chinese multinational and one of the biggest banks in the world by assets – guaranteeing funding.
The latest development means the government will now commence negotiations on the project framework with the GE/IA venture.
However, like it happened early last year when Russia’s RT Global Resources walked away at the last minute, more developments are likely to unfold with this project in the near future.
Related: Uganda selects oil refinery investor