Russia’s Rostec bids for $3 billion Uganda refinery

November 06, 2013 | Budget & Investment, Contracts

A section of the Mombasa refinery, Kenya

A section of the Mombasa refinery, Kenya

Moscow (RT) – In a tender involving global giants such as Total SA and China National Offshore Oil Corporation (CNOOC), Russian Rostec wants to set up the first oil refinery in the fast growing market of Uganda, one of the most business friendly places in Eastern Africa.

The subsidiary of  Russian state corporation Rostec – RT – Global Resources –  will partner the VTB Capital, while Tatneft will take over the operational role.

Preliminary estimates suggest the cost of the country’s first oil refinery to be built in the city of Hoima will be around $3 billion, the Izvestia paper reports.

The Ugandan oil market is growing 10 percent annually. It’s one of the most politically stable countries in Eastern Africa, with no local conflicts or warring neighbours, the paper quotes Karen Simonyan, the President of the Russian-African fund to support science, culture and business cooperation. Production from the refinery will go both to internal and external markets, which don’t have any refineries. Because the country is land locked the oil products will carry a premium.

According to the tender 40 percent of financing will be provided by Uganda, while the company that wins will be responsible for the remaining 60 percent. More than 50 international bidders are interested in developing the refinery. The results of the tender will be announced in 2014, while construction process will commence in 2015, according to Daily Monitor.

New exploration will also take place at Alberta Lake that has estimated reserves  from 6 to 8 million barrels of oil. The refinery is expected to provide 1.5 million tonnes of products a year by 2017, which will almost completely cover Ugandan needs. By 2020 production at the plant is expected to double.

Investment from Russia will be less than $1 billion, according to Andrey Korobov, the General Director of RT – Global Resources, Izvestiya reports. The consortium is aimed to recoup the money spent on the project in a short time due to the high oil price.

Rostec considered 25 companies as major rivals, including those from the UK, US and China. The main criterion for Uganda is the construction time. Ugandan representatives have only visited Russia to talk about the proposed agreement.