Four firms submit refinery proposals

By Ibrahim Kasita

Four firms have submitted proposals to the Government for the role of lead investors in developing the 60,000 barrels per day oil refinery and related infrastructure, the energy ministry has said.

The firms include the China Petroleum Pipeline Bureau (CPPB) from China, Marubeni Corporation form Japan, RT-Global Resources from Russia and SK Group from South Korea. However, two firms; PETROFAC from the United Arab Emirates (UAE) and VITOL SA from Switzerland, which had earlier expressed interest in the project, did not submit proposals.

“The response to our request for proposals attests to the competitiveness of Uganda’s refinery project and the East African region’s business environment that provides an excellent investment destination, Fred Kabagambe-Kaliisa, the permanent secretary in the energy ministry, said.

“We expect that the bids submitted will be in line with the Government’s requirements for a credible, experienced and financially capable partner to work with Uganda to develop a refinery.”

The development follows a bidders’ conference that was held in March 2014.

During the conference the prospective bidders were briefed on the project and they obtained clarifications regarding the requests for proposals, visit the refinery project site being acquired by the Government and some of the oil fields, and meet with the upstream oil companies to have a dialogue on crude supply arrangements for the refinery.

China Petroleum Pipeline Bureau and its consortium members have executed major refining and or pipeline projects in India, Chad, Kenya, Thailand, Mozambique and China, among others.

Marubeni Corporation has developed power projects, refineries, petrochemical plants, upstream assets and gas infrastructure in a number of countries, including the US, UK, India, Qatar, Russia, and Kazakhstan. RT — Global Resources is a state international (export) investment development company that finances large infrastructure projects.

The firm and its consortium members have developed key refining projects in Russia, SK Group owns the second largest refinery in the world of 1.12 million barrels per day.

PETROFAC which did not submit the proposals, indicated that they were opting to concentrate on their core business in engineering, procurement and construction for the upstream petroleum sub-sector.

VITOL SA cited internal reasons among the consortium members, which affected its submission.

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An aerial view of an oil exploration site in Bulisa district

A press statement issued mid-this week said an evaluation team comprising of representatives from the Government and the transaction advisor, TaylorDeJongh, will undertake a detailed evaluation of the proposals during this month.

“The evaluation process is expected to take one month and after which, results will be announced. Negotiations are expected to be concluded by the fourth quarter of 2014,” the statement read.

The technical evaluation, the ministry said, will include an assessment of the project implementation plan, relevant experience, operational plan, and local content strategy. The bidders are also expected to detail their health, safety, security and environment protection strategy together with a financial plan.

The financial plan should explain the estimated capital costs of the project, how the investor will raise the required financing for the project, crude oil acquisition strategy and product sales plans.

“The evaluation criteria will include, but not be limited to, the overall technical experience and financial capacity and the development, financial and commercial plans submitted by the bidders,” Robert Kasande, the refinery project manager, explained.

“One of Government’s objectives is to select an investor that will develop a refinery to convert Uganda’s waxy crude oil into the desired petroleum products that meet set standards.”

Legal backing

The fourth objective of the oil and gas policy for Uganda is to promote value addition of the country’s oil and gas resources through in-country refining of crude oil.

The Government contracted a UKbased energy firm, Foster Wheeler Energy Ltd, to conduct a feasibility study on building a refinery in Uganda in 2010.

The study considered the crude production potential and also undertook a comparative analysis between building a refinery and a crude export pipeline to the Indian Ocean coast.

The enactment of the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013 gives legal foundation for the refinery development.

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