RT-Global seeks additional partner for Uganda oil refinery project; framework agreement to be signed this quarter

09 Feb 16 – RT-Global Resources, a subsidiary of Russian state-owned Rostec, is open to a third stakeholder buying into its Hoima oil refinery project in Uganda, a company spokesperson said.

“Despite the fact that all the shareholders in the lead investor company are fully committed to remaining in the project, the Project Framework Agreement allows for some flexibility and allows for third-party investors to join the project,” the spokesperson said. 

RT-Global Resources leads a consortium that comprises Telconet Capital Partnership, VTB Capital, Tatneft JSC and GS Engineering & Construction, which was awarded a 60% share of the Hoima refinery project in February 2015.

Mergermarket previously reported that RT-Global Resources has put together a group of banks, including Russian lenders and Asian export-credit agencies, to finance Hoima, which is has an estimated capex of USD 4bn.

The project will be developed under a public private partnership (PPP) agreement, with the Ugandan government holding a 40% equity stake.

The Hoima refinery will have a capacity of 60,000bbl/day. It will be situated near the Lake Albert Basin, which is an USD 1bn oil exploration project under development by Total [NYSE:TOT], Tullow Oil [LNO:TLW] and China National Offshore Oil Corp (CNOOC).

Preparation of the project framework agreement for the Hoima refinery is now in the advanced stages. It will cover the long-term collaborative agreement between the project’s stakeholders, the RT-Resources spokesperson said. The agreement is expected to be signed this financial quarter, they added.

Subsequent milestones include further front-end engineering design (FEED) preparations. The Final Investment Decision (FID) is expected to be made in the first half of 2018 after the FEED is made, since FID will be based on the FEED results, the spokesperson said.

The Ugandan government is not aware of any ongoing discussions with a potential new suitor for the project, a source there told Mergermarket.

Additionally, the Ugandan government is aiming to reduce its stake by at least 10%, from 40% to 30%, the source said. It expects to be able to reduce its interest in the project through stake sales to neighbouring countries, the government source said.

The Ugandan government has publicly invited the governments of Tanzania, Kenya, Rwanda and Burundi to join the project. So far, only Kenya has pledged to buy a stake of Hoima, and is set to purchase a 2.5% stake for about USD 13m.

The sale of stakes in the refinery to the East African Community partner states are expected to be finalised by the next summit of the Heads of State under the Northern Corridor Integration projects, where this matter will be discussed, Ernest Rubondo, Commissioner of Uganda’s Petroleum Exploration and Production Department, told Mergermarket.

While the next Heads of State under the Northern Corridor summit has not yet been planned, in the past few years these meetings have taken place regularly, several times each year, the source from the Ugandan government noted. 

by Katie McQue

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