American consortium gets nod for new Uganda refinery

August 7, 2017 in Business, Energy, Finance, Hydrocarbons, Infrastructure by Editor

August 7— The Albertine Graben Refinery Consortium (AGRC)  has agreed on the core project terms with the government for a new oil refinery designated as a Greenfield initiative to be located in the southwestern district of Hoima. Greenfield basically means this is a totally brand new project from ground-up.

As reported by 256BN last month, the consortium which includes US-based  technology and engineering giant, GE, looked set to be picked over their Chinese rivals as way to also open up Uganda’s infrastructure market already dominated by Chinese companies.

Dr. Stephen Isabalija, the Permanent Secretary in the energy and minerals development ministry said in a statement, “The AGRC Consortium is made up of General Electric (GE) Oil and Gas, YAATRA Ventures LLC, Intracontinent Asset Holdings Ltd (IA) and Saipem SpA, in the role of Engineering, Procurement and Construction partner (EPC).”

‘The Consortium has proposed to government a financing approach and a path to establish develop and operate a commercially viable refinery company with a strategic benefit to the country and the region,’ Isabalija said in the statement.

He said decision follows a “thorough review process” of the four investors who were shortlisted for the development of the much anticipated refinery which has been bedeviled by delays mostly due to potential bidders suddenly getting cold feet and pulling out.

The planned 60,000-barrel-a-day refinery will receive supplies from oil fields in the Albertine region. Uganda has an estimated 6.5 billion barrels of crude reserves of which some two billion barrels is recoverable. The agreement of the core project terms, according to the statement, signals the start of government discussions and negotiations with the Consortium on the Project Framework Agreement (PFA).

“The PFA will detail the proposed solutions, validation of the solutions, risk mitigation measures, and additional due diligence necessary for accelerating investments and financing for the project,” Dr Isabalija said. The PFA, the permanent secretary says, is expected to conclude and be signed within the next 2 months.

It is stated that the signing of the Project Framework Agreement will in turn pave the way for commencement of pre-Final Investment Decision (FID, opening the way for activities such as Front End Engineering and Design (FEED), Project Capital and Investment Costs Estimations (PCE), Environmental and Social Impact Assessments (ESIA) and other relevant commitments.

When the agreement is signed, “the Consortium will be granted the rights and licenses to develop and manage the refinery as lead investor in a joint venture partnership with Government,” Dr. Isabalija said.

The energy minister, Eng. Irene Muloni, a few months ago, said the government will participate in the refinery project through the Uganda Refinery Holding Company (URHC), a subsidiary of the Uganda National Oil Company (UNOC). She said it is through the URHC that the confirmed interests of the East African Partner States will also be held.

The term ‘green field investment’ refers to a project where a company builds the entirety of its operations in a foreign market starting from scratch, or a so-called green field. These projects are foreign direct investments that provide the highest degree of control for the sponsoring company. In these projects, the company’s plant construction is done to its own specifications, employees are trained to company standards and fabrication processes can be tightly controlled.