Introduction to the Uganda Refinery Project, September 2013

Uganda's Refinery involves the development of a greenfield oil refinery, with a capacity of 60,000 BPD in Uganda, and the associated downstream infrastructure (the Project). The Project will be owned by the selected firm/consortium and the GOU in a 60:40 partnership.

The Project will primarily serve the petroleum product markets in Uganda and its western neighbors. Additional outlets will be available within the larger product markets of Kenya and Tanzania.  The refinery will serve a potential market of 232,000 BPD in its first year of operations.

Download the Publication Introduction to Uganda's Refinery Project, September 2013

RT Global Resources emerges Selected Preferred Bidder in Uganda's Refinery Project

7th February 2015 - Government of Uganda (GOU) has selected the RT Global Resources - led consortium from the Federation of Russia as the Selected Preferred Bidder for Uganda’s Refinery Project, with SK Engineering and Construction led consortium from Republic of South Korea as the Alternate Preferred Bidder. 

This follows submission of Final Offers from the two bidders during January 2015 which were evaluated by a team from the Government and Taylor Dejongh, Government’s Transaction Advisor.

Eng. Irene Muloni, Minister for Energy and Mineral Development said, “The process of selecting a lead investor Uganda’s refinery project has been highly competitive. We are pleased that the two bidders responded to the Request for Final Offers, from which RT Global Resources emerged as the Selected Preferred Bidder.  We have confidence that we will execute the Project Agreements and go-ahead to develop Uganda’s Refinery Project.”

The government will proceed to hold negotiations on the principal agreements with RT Global Resources led consortium starting on March 2015 with an aim of reaching an agreement within 60 days.  Members of this consortium are Telconet Capital Ltd Partnership, VTB Capital PLC, Tatneft JSC, and GS Engineering & Construction Corporation.

“The objective of these negotiations is to conclude the Project Agreements to the satisfaction of Government and the Lead Investor. These include the Project Framework Agreement, Shareholders Agreement, Implementation Agreement, and the Escrow Agreement”, Mr. Fred Kabagambe-Kaliisa, Permanent Secretary in the Ministry added.

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.

“The SK Engineering and Construction led Consortium has been a strong competitor throughout the selection process leading to the final offer, however they came short on key requirements of Government including contribution to the private share and operating plan”, Mr. Kabagambe-Kaliisa said.

If at the end of the negotiations with RT Global Resources, Government is not satisfied that the major issues in the agreements do not meet its satisfaction, it may exercise its option to commence negotiations with the Alternate Preferred Bidder, SK Engineering and Construction led Consortium. Members of this Consortium include SK – KDB Global Investment Partnership Private Equity Fund, China State Construction Engineering Corporation Ltd, Haldor Topsoe A/S, and Maestro Oil and Gas Solutions (MOGAS) DMCC.

Uganda’s refinery project is to be developed under a public-private partnership (PPP) arrangement with the Government holding 40% equity.  The East African Community Partner States have shown interest in participating in the Public Shares.  The Project involves the development of a refinery with a capacity of 60,000 BPD, development of crude oil and product storage facilities on-site, as well as a 205-kilometer product pipeline to a terminal near the capital city, Kampala.  The first phase of the refinery is expected to be in place by 2018.

74% of the Project affected persons (PAPs) in the 29 Square kilometers of land which is now being acquired for the Refinery Project have now been compensated and payment for the remaining PAPs is in final stages.  In addition, Physical planning for 533 acres of land that has been acquired within Buseruka Subcounty for the project affected persons who opted for resettlement is ongoing.

Uganda’s Petroleum resources are now estimated at 6.5 billion barrels of oil initially in place from the 21 oil and gas discoveries made in the country to date.  Less than 10% of the Albertine Graben is currently licensed and plans to hold the Country’s first competitive licensing round during 2015 are underway.

Media Contact:
• Mr. Robert Kasande, the Refinery Project Manager, refining@petroleum.go.ug 
• Gloria Sebikari, Senior Communications Officer, +256 794 628754 communications@petroleum.go.ug

Uganda’s Oil Refinery – An Opportunity for transformation

Uganda’s petroleum products consumption is at 27,000 barrels/day and that for East Africa is close to 200,000 barrels/day growing at an annual rate of about 7%. This fact presents an opportunity to Uganda, with the confirmation of over 1.4 billion barrels of recoverable oil in the country.

Objective 4 of the National Oil and Gas Policy (2008) for Uganda is to promote valuable utilization of the country’s oil and gas resources through in-country refining of crude oil. In fulfillment of this objective, the Ministry of Energy and Mineral Development formulated a Refinery Development Programme (RDP) to guide the development of a refinery in the country.

Uganda’s RDP is in line with the East African Regional Refineries Development Strategy, adopted by the EAC Partner States in 2008 which recommended that the second refinery in East Africa be developed in Uganda. Subsequently, Government contracted Foster Wheeler Energy Limited Ltd from the United Kingdom to conduct a feasibility study on building a refinery in Uganda in 2010/2011. The feasibility study recommended that the development of 60,000 barrels per day refinery was commercially viable with a Net Present Value (NPV) of US$ 3.2 billion at a 10% discount rate and an Internal Rate of Return (IRR) of 33%.

It also recommended the size and configuration of the refinery, location, financing options, social and environmental assessment, among others. Government plans to develop a refinery with an input capacity of 60,000 barrels per day in a modular manner, with the first phase in place by 2018. The enactment of the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013 gives a firm legal foundation for this development together with other related infrastructure. The planned refinery will produce Liquefied Petroleum Gas (LPG), diesel, petrol, kerosene, jet fuel and Heavy Fuel Oil (HFO).

Location and Land Acquisition

The feasibility study recommended Kabaale Parish in Buseruka Sub County, Hoima district as the most suitable location for the refinery. This is due to its centrality in relation to the entire Albertine Graben, proximity to the oil fields, sparse population and relatively low laying terrain among others. The Ministry is in the process of acquiring 29 sq.km of land for the refinery. This land will host staff quarters, a health facility, an International Airport, waste management facilities and petrochemical industries among others.

A Resettlement Action Plan (RAP) to guide the acquisition of the required land was undertaken during 2012. The objective of the RAP was to develop a framework for managing the loss of economic activities and livelihoods through compensation and/ or relocation of the affected people. The RAP study was conducted between June and October 2012 after engagements with the district, local, cultural, and religious leaders together with the affected communities. It involved sensitization of affected communities about the project and available resettlement options, a socio-economic baseline study, cadastre survey of individual parcels of land and valuation of the property.

The valuation report was approved by the Chief Government Valuer in December 2012. The compensation rates for crops and non-permanent structures are set by the District Land Boards and approved by the Chief Government Valuer in Ministry of Lands, Housing and Urban Development. The value for land is determined by professional valuers after conducting a survey to establish the prevailing market price for land in a given locality. These rates are also verified and approved by the Chief Government Valuer. Implementation of the RAP commenced in July 2013 with disclosure of compensation values to verified land, crop and property owners. The disclosure was a transparent and voluntary process done in the presence of the Village RAP Committee and Local leaders. Affected persons are shown a detailed breakdown of their property including acreage of land and the monetary value. The PAPs were then trained in financial management and livelihood improvement to enable them to put to good use the compensation packages. Payment of compensation packages commenced in December 2013 and resettlement areas/land has been identified for those that opted for resettlement.

Construction of resettlement houses will commence after the said land has been paid for. As this process is ongoing, sensitization and engagements with the PAPs continues to ensure a smooth exercise. The process of RAP implementation has been largely successful due to the cooperation between the Ministry, Local Government leaders (technical, cultural, political) at all levels and the Communities with over 95% of the PAPs signing the compensation agreements. Any grievances are handled within the established frameworks and grievance handling mechanisms. This exercise is aligned to the existing laws and international guidelines such as the Equator Principles/IFC/World Bank operational guidelines and other safeguard policies on resettlement.

Financing the refinery

Uganda contracted the services of a Transaction Advisor (TA), Taylor-DeJongh, an energy investment firm from the USA. The TA is supporting Government in sourcing for the lead investor and financing for the refinery, which will be developed on a Public-Private Partnership basis. Six firms/ consortia were short-listed and received the Request for Proposals for a Lead Investor/Operator during January 2014 following a Request for Qualification that runs in international and local media during October 2013.

One of these firms/consortia will be selected in 2015 to lead the Uganda Refinery Project. Some EAC Partner States have also expressed interest in owning shares in Uganda’s refinery.

Benefits of Uganda’s Refinery

The East and Central African region has only one refinery in comparison with other regions like South Africa with seven refineries and North Africa with 21 refineries. Uganda, like the other EAC Partner States, therefore faces challenges instability of supply of petroleum products.

The refinery in Uganda will boost the region’s refining capacity and ensure the security of supply of petroleum products especially for the landlocked Partner States such as Rwanda and Burundi. Besides being a strategic investment for the country and the region, developing a refinery in the country will improve Uganda’s balance of payments by reducing the petroleum products import bill. The Project will also contribute to economic gains for Ugandans as the construction of the refinery alone is estimated to create 4,000 to 6,000 temporary jobs. Once complete, ongoing refinery operations are expected to create more than 650 permanent jobs. The development of attendant industries such as the petrochemical and manufacturing industries will also create jobs for Ugandans and ensure the transfer of technology in the refining and associated industries.

Other benefits include a contribution to the country’s growing energy requirements by providing Heavy Fuel Oils (HFO) which can be used for power generation and Liquefied Petroleum Gas (LPG) that will help offset the use of trees for domestic cooking. As a country and a region, let us rally behind Government in taking this project forward which is in line with the National Oil and Gas Policy.

Government of Uganda is committed to ensuring that the processes leading up to the development of the refinery are handled transparently and in accordance with the laws of the country and international best practices. ENDS

Uganda’s Refinery Project Tender Progresses to the Negotiations Phase

KAMPALA, 24th June 2014 – Two of the four bidders that submitted proposals to the Government of Uganda (GOU) for the role of lead investor for the 60,000 barrels per day (BPD) oil refinery and related downstream infrastructure have been invited to progress to the next stage of the tender process. This followed the issuance of a Request for Proposals (RFP) for the Uganda Refinery Project during January 2014 with a submission deadline of 30th May 2014.

“The RFP required the submission of a Bid Bond, and detailed technical, financial and commercial plans to develop, finance, build and operate the Project in partnership with the GOU, among other requirements. The bidders were also required to review and comment on draft Principal Project Agreements”, Mr. F.A Kabagambe-Kaliisa, Permanent Secretary of the Ministry of Energy & Mineral Development (MEMD) revealed.

The two bidders that have been invited to progress to the next stage of the tender process are; SK Group led Consortium (South Korea) and RT Global Resources led Consortium (Russia). The proposal from Marubeni Corporation was not evaluated due to lack of a bid bond as required by the RFP, while China Pipeline Petroleum Bureau’s proposal did not adequately satisfy all the requirements of the RFP. The evaluation was conducted during June 2014 by a team comprising of representatives of Government of Uganda supported by the Government’s Transaction Advisor, Taylor –Dejongh.

“Government will commence negotiations with the two preferred bidders and thereafter issue a request for the Best and Final Offers (“BFO”) document. The two consortia will be expected to submit their respective Best and Final Offers. The government will then negotiate the Principal Project Agreements with the highest scoring Preferred Bidder and once executed, take forward the development of the project”, Mr. Kaliisa added.

Uganda’s refinery project is to be established under a public-private partnership (PPP) arrangement with the Government holding up to 40% equity. It involves the development of a refinery with a capacity of 60,000 BPD, development of crude oil and product storage facilities on-site, as well as a 205-kilometer product pipeline to a terminal near Uganda’s capital city of Kampala. The first phase of the refinery is expected to be in place by 2017/2018.

Media Contact: Gloria Sebikari, communications@petroleum.go.ug , +256 794 628754

Government issues Request for Final Offer for Lead Investor for Uganda’s Refinery Project

KAMPALA, 10th December 2014 – Government of Uganda (GOU) issued a Request for Final Offer (RFFO) to the two preferred bidders for the lead investor for the 60,000 barrels per day (BPD) oil refinery and related downstream infrastructure. The RFFO was issued to SK Group led Consortium (South Korea) and the RT Global Resources (Russia) led consortium on 27th October 2014.

Mr. F.A. Kabagambe-Kaliisa, Permanent Secretary Ministry of Energy and Mineral Development said, “We held preliminary negotiations with SK Group led consortium and RT Global Resources led consortium between August and September 2014. The bidders were then issued with the Request for Final Offer (RFFO) with a submission deadline of 19th January 2015.”

The preliminary negotiations were necessary to give the bidders clarity on the Government’s expectations and also understand their position as investors before they submit their final offers. Following the negotiations and issuance of the RFFO, the bidders will prepare and submit their refined technical, financial and commercial and legal offers. They are expected to document their technical concept design for the refinery, project implementation and operating plans, National content policy and project management teams, among others. They will also detail their financial and long-term business plans and review the terms of the different Project Agreements proposed by Government.

The final offers will be evaluated by a team from Government supported by the Government’s Transaction Advisor, Taylor –Dejongh. The winning bidder is expected to be selected in February 2015.

“During the negotiations, the bidders requested for an incentive package and this required additional time for consultations with other line Ministries and Government Agencies,” Mr. Kabagambe-Kaliisa added, explaining the extension in the timeline for announcement of the winning bid.

Upon execution of the different project contracts, the lead investor and Government will constitute a Refinery Company that will take forward the engineering and financing aspects for the development of the refinery. Uganda’s refinery project is to be developed under a public-private partnership (PPP) arrangement with the Government holding 40% equity.

It involves the development of a refinery in Buseruka Sub-county, Hoima District with a capacity of 60,000 BPD, development of crude oil and product storage facilities on-site, as well as a 205-kilometer product pipeline to a terminal near Uganda’s capital city of Kampala. The first phase of the refinery is expected to be in place by 2018.

Over 70% of the Project affected persons in the 29 Square kilometers of that is being acquired for Uganda’s Refinery Project and the rest will be paid by the end of 2014.

In addition, 533 acres of land have been acquired within Buseruka Subcounty for those who opted for resettlement. Uganda’s Petroleum resources are now estimated at 6.5 billion barrels of oil initially in place from the 21 oil and gas discoveries. Exploration work has only been undertaken in less than 40% of the Albertine Graben which is the most prospective sedimentary basin in the country.

Media Contact: • The Refinery Project Manager, Mr. Robert Kasande, refining@petroleum.go.ug

• Gloria Sebikari, communications@petroleum.go.ug , +256 794 628754