Uganda scraps USD 4bn Hoima refinery project, considers smaller alternatives – sources

12 Janaury 2017 – Uganda has abandoned its plans to build a USD 4bn oil refinery, known as the Hoima Refinery Project, two sources briefed on the situation said.

A spokesperson for Uganda’s Ministry of Petroleum did not confirm that the government had abandoned the project but said the country is now exploring alternative projects, which will require a new tender process. The ministry is in talks to decide whether the new tender will be closed or open to all bidders based on what investors want, but new plans will require government approval, the spokesperson said, declining to specify when the talks might conclude.

As an alternative to the large Hoima refinery, which was expected to have had a capacity of 60,000 barrels of oil per day, the Ugandan government is looking into constructing a much smaller one, the sources said. Uganda has contacted the Russian consortium that won the tender for the original project, in order to gauge its interest in getting involved in the smaller alternative, the sources added.

The Ugandan government has sent a letter inviting the Russian consortium to construct a mini-refinery with a production rate of 300 tons per day. “It is not the Hoima Refinery project, it is different—a really local thing,” the first source said, adding that there is no concrete decision yet on whether the Russians will be involved in the project.

The Hoima refinery was to be located near the USD 1bn Lake Albert Basin oil exploration project under development by Total, Tullow Oil and China National Offshore Oil Corp (CNOOC).

The Russian consortium that won the February 2015 tender to build the project and take a 60% stake in the asset comprised Rostec Telconet Capital Partnership, VTB Capital, Tatneft JSC and GS Engineering & Construction Corporation. The Ugandan government was to retain the remaining 40% of the project. The Russian group, however, backed out of the project in July when talks with the Ugandan government broke down, as reported by this news service.

The Uganda government subsequently held talks with CNOOC and South Korea-based SK Energy in the hope of replacing the Russian consortium, as reported by this news service.

by Katie McQue