General Electric-led consortium signs refinery deal, upsetting energy officials

L-R: Domenico Fornara, Italy’s ambassador to Uganda, Rajakumari Jandhyala, YAATRA Ventures CEO and managing partner, President Yoweri Museveni, Irene Mulogi, the minister of energy, and Deborah Malac, the American Ambassador to Uganda at the signing of a project framework agreement with the Albertine Graben Refinery Consortium to finance and construct Uganda’s first oil refinery.

The government this afternoon signed a project framework agreement with the Albertine Graben Refinery Consortium to finance and construct Uganda’s first oil refinery, a deal that’s left senior officials in the ministry of energy upset. President Museveni presided over the signing of the refinery agreement at State House, Entebbe.

Sources familiar with the deal told this website that some officials, including minister Irene Muloni, have for sometime been “cold” about AGRC which was cleared by Cabinet early in February to design, finance, construct and maintain the $4bn refinery. The facility will be constructed in Hoima district.

Ms Muloni and her camp had thrown their weight behind the Chinese venture M/s Guangzhou DongSong.

Sources said the choice of AGRC pitted Ms Muloni and officials in the energy ministry on one side against the Uganda National Oil Company boss, Josephine Wapakabhulo, and the Uganda Refinery Holding Company general manager, Michael Mugerwa, and their allies on the other side.

Ms Wapakabhulo is accused of using textbook methods in managing an otherwise complex operation that also “requires a bit of experience”, energy officials said. What works for her is “she has the president’s ear”.

Ms Wapakabhulo has had to endure a bumpy ride in the ministry since her appointment as Unoc CEO in June 2016 because she was seen as an outsider.

It was Ms Wapakabhulo’s team that recommended the AGRC consortium – which comprises of Nuovo Pignone International SRL (a General Electric subsidiary located in Italy), SAIPEM SPA (Italy), YAATRA Africa (a subsidiary of Washington DC-based YAATRA Ventures, incorporated in Mauritius) and Lionworks Group Limited (Mauritius) – for the lucrative tender.

This recommendation was bolstered by claims that a section of energy ministry officials had taken bribes from DongSong, the closest competitor on the deal, and the need to balance foreign interests in Uganda’s oil sector.

Uganda’s stake in the refinery will be carried through the Uganda Refinery Holding Company, a subsidiary of Unoc. The project will be developed through a public-private partnership, with the consortium taking a majority stake. According to earlier plans, the government was to retain a 40% stake in the project.

Read more: America’s General Electric and Italy’s Saipem given nod on refinery tender

Construction of the first phase of the 30,000 barrels per day refinery is expected to be complete by 2020. There are plans to add another 30,000 bpd phase by 2022.

Uganda is estimated to have 6.5 billion barrels of oil deposits with an estimate of 1.4-1.7 billion barrels recoverable.

The deal paves away for the consortium to start pre-final investment decision activities – like front end engineering and design, project capital and investment costs estimation, environmental and social impact assessments – in about 18 months. The final investment decision is expected later next year.

According to the agreement, AGRC will be responsible for funding the pre-FID activities.

The US ambassador Deborah Malac and Italian ambassador Domenico Fornara also attended the signing ceremony.

President Museveni said the participation of a western consortium in the bidding process shows that western companies have woken up to Africa’s potential. He contrasted them with China, which he said has been active in doing business with Africa.

“There is a lot of sleeping in Africa; you find people who should know but instead don’t know,” he said. “And also there has been sleeping in the West, they don’t care about what potential is in Africa.”

He added: “Africa is going to be a huge power house in terms of business,” noting that the continent’s leaders have resolved some of the obstacles to doing business like fragmented markets and confiscation of private companies by past governments.

“Africa and the West share a lot of history together and there is a need for them to use these past linkages to further economic business,” the president said.

According to a State House press statement, Ms Muloni said the signing ceremony marked the end of the selection process that commenced in January 2017. She said her ministry had done extensive consultations before arriving at who to assign the project.

Related: Uganda selects oil refinery investor