*Investors sought after Russian-led group discussions stall
*60,000 barrel-a-day refinery to be built at cost of $4 billion
31 October 2016, Kampala — Total SA, the French oil company drilling wells in Uganda, agreed to take a 10 percent stake in the country’s planned refinery as it seeks other investors for the $4 billion plant, Energy Minister Irene Muloni said.
Negotiations with a group of investors led by RT GlobalResources LLC, a unit of Rostec State Corp. of Russia, on the construction of the refinery collapsed earlier this year, while proposed talks with a group led by SK Engineering & Construction Co. of South Korea haven’t gained traction. That’s forced the government to engage with other potential investors and pushed the completion of the first phase of the project to 2020 from 2018, Muloni said Oct. 26.
“The process with RT Global ended because they brought new impossible conditions which were unfavorable to our government and now we are engaging other companies that are interested in the refinery,” Muloni said in an interview in the Tanzanian coastal town of Tanga where she held talks with her Tanzanian counterpart about a proposed oil pipeline that will link the two countries. “Even SK, by the time we got back to them they said their consortium could not continue with the project so it’s now other parties.”
The proposed 60,000-barrel-a-day refinery will be supplied by oil fields discovered in Uganda in 2006 and estimated by the state to hold 6.5 billion barrels of crude resources. Total is developing the fields in a venture with London-based Tullow Oil Plc and China’s Cnooc Ltd. Uganda is reserving 60 percent of the facility for private investors, while the remaining 40 percent has been set aside for governments of the six-nation East African Community.
Total spokeswoman Ahlem Friga-Noy said she couldn’t immediately comment when contacted by phone Thursday.
Neighboring Kenya has recoverable resources estimated at 750 million barrels and Tanzania has companies prospecting around the western Lake Tanganyika region.
So far, Tanzania agreed to take the 8 percent stake it was offered, while Kenya plans to take up 2.5 percent instead of the 8 percent shareholding available to it, Muloni said. Kenya Pipeline Co., a state-owned company, is considering refurbishing a mothballed refinery in the coastal city of Mombasa that may process the country’s future oil production.
“Whatever will remain untaken, the government of Uganda will take,” she said. Other EAC nations include Rwanda, Burundi and South Sudan.
Uganda suspended talks with RT Global in June, a month after announcing it had reached an agreement-in-principle with the Russian company for the construction of the refinery. The talks were halted after the group led by RT Global made “additional demands,” the Energy Ministry said at the time. The consortium was invited to renew talks earlier this month, according to a joint statement issued by the two nations’ governments. Rostec declined to comment.
After the collapse of the talks with Rostec, Uganda’s government invited the SK Engineering-led consortium for negotiations. China State Construction Engineering Corp. joined the group of investors interested in building the refinery, the Kampala-based New Vision newspaper reported on Oct. 17. Calls to the Beijing-based company weren’t answered when Bloomberg called seeking comment outside normal business hours.
Uganda hasn’t received any details about renewed interest by the SK Engineering group, Robert Kasande, the acting director of Uganda’s Petroleum Directorate, said in an interview Oct. 19. SK declined to comment, according to a spokesman who declined to identify himself citing internal company policy.
Muloni didn’t identify which companies the government is talking to.
“There are many interested parties who have shown interest and we think some of them are very serious,” she said. “An investment of $4 billion is not small so it needs serious people. And there are a good number of them who have come on board who are serious.”
Uganda’s government projects that it will earn $43 billion of revenue from oil over a quarter of a century after the start of production, which is expected in 2020.
*Joseph Burite & Fred Ojambo – Bloomberg