A joint venture of American and Italian firms awarded the tender to design, finance and construct Uganda’s Greenfield oil refinery has hinted on closing the $4 billion (Shs14 trillion) Final Investment Decision (FID) for the project next year.
The Albertine Graben Refinery Consortium (AGRC) closed the agreement on capital investments or FID this week on the sidelines of the US-Africa Leaders Summit in the US capital, Washington, according to a statement from State House.
“The announcement today brings Uganda and the region one step closer to a long-held dream: to add value to our resources, and achieve energy security and economic prosperity for all its citizens,” Mr Museveni was quoted as saying.
AGRC’s executives were led by Ms Rajakumari Jandhyala, the chief executive of Washington DC-based Yaatra Ventures LLC and the presidents of Africa Finance Corporation (AFC), Eastern and Southern Trade and Development Bank (TDB), Honeywell, Baker Hughes.
AGRC is a special purpose vehicle formed by America’s General Electric International Operations Company, Inc, Italy’s Saipem SpA, Mauritius-based private equity fund Intra-continental Asset Holdings (IA), and Washington DC based Yaatra Ventures LLC.
The consortium had been beaten to the tender by a Chinese joint venture, but the deal was flipped on the premise of balancing foreign interests in Uganda’s oil sector.
The upstream (operation of the oil fields) are French TotalEnergies EP and China’s CNOOC which also carry stake in midstream (East African Crude Oil Pipeline).
The refinery once developed will be the first American-Italian investment in Uganda.
AGRC was handed the refinery tender on the basis of, among others, the reputable companies in its stable (General Electric with an estimated turnover of $300 billion and Saipem SpA), which meant “good corporate governance and strong project risk management principles” capable of attracting private equity financing.
The refinery is expected to be financed in a Public Private Partnership arrangement of 60:40 ratio.
The government’s 40 percent equity share is equivalent to Shs2 trillion ($500 million), and was defined in December 2017 by the Uganda National Oil Company (Unoc) shareholders; the ministries of Finance and Energy, at their last annual general meeting.
Uganda’s share will be carried through the Uganda Refinery Holding Company, a subsidiary of Unoc, which is mandated to manage the country’s commercial interests in the oil sector.
Kenya and Tanzania had initially offered to buy 2.5 percent and eight percent stakes respectively, as part of Uganda’s 40 percent share. TotalEnergies E&P also offered to buy a 10 percent stake, leaving the government with roughly 19 percent stake. It remains unclear how far discussions progressed.
Standing his ground
After announcing discovery of commercial oil volumes in 2006, President Museveni stood his ground on developing a local refinery even when the project economics remain unconvincing for some industry players.
The President has variously argued that there is a ready market in Uganda for the locally refined petroleum products, and a captive market in Rwanda, East Congo and other neighbouring countries—making Uganda’s refinery viable.
According to the Energy ministry, Uganda’s fuel/petroleum products imports as of last September averaged 85 million litres, with demand growing at seven percent per annum.
The planned refinery will produce Liquefied Petroleum Gas (LPG), diesel, petrol, kerosene, jet fuel and Heavy Fuel Oil (HFO).
During the Washington meeting, AFC’s chief executive officer Samaila Zubairu said they are one of the early-stage investors and committed to investing and supporting the mobilisation of capital from partners for the economically transformative refinery project.
“This project supports sustainable industrialisation, provides employment to one of the youngest populations on the planet and helps achieve a more equitable energy transition in Africa,” Mr Zubairu was quoted as saying.
In 2018, the government and AGRC inked the Project Framework Agreement for the project. This paved the way for among other technical studies, refinery configuration, Front End Engineering Designs (FEED), Environment and Social Impact Assessments, which have since been completed and submitted to the relevant government agencies for review.
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