Uganda Picks GE for Group to Develop Oil Refinery Project

(Bloomberg) -- Uganda chose a group including General Electric Co. to build and operate a 60,000-barrel-a-day refinery that will process crude from fields being developed by Total SA and Tullow Oil Plc.

The Albertine Graben Refinery Consortium -- which also includes Yaatra Ventures LLC, Intracontinent Asset Holdings Ltd. and Italy's Saipem SpA -- was picked after a review of more than 40 companies, Uganda's Energy Ministry said Monday in a statement. 

Uganda has been seeking a new developer for the $4 billion facility since negotiations with groups led by Russia's RT Global Resources LLC and South Korea's SK Engineering & Construction Co. collapsed. GE has recently expanded in the industry by teaming up with Baker Hughes Inc., while Saipem, a $4.1 billion company based in Milan, has operated for more than 50 years.

“The risk to the project getting delivered is smaller because those companies are both very good at what they do,” Alan Gelder, vice president of refining, chemicals and oil markets at consultants Wood Mackenzie Ltd., said by phone.

The government expects to conclude a project framework agreement with the developers over the next two months, according to the Kampala-based ministry. 

“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,” the ministry said. “The oil refinery is expected to spur growth of petrochemical and other related industries in Uganda.”

Plant Capacity

The facility in Hoima district will initially be able to process 30,000 barrels a day. Starting in 2020, the plant will be supplied by fields with 6.5 billion barrels of resources, developed by Total, London-based Tullow and China's Cnooc Ltd.

Gelder said it's hard to estimate a cost for the project because Uganda doesn't yet have all the infrastructure it needs to bring equipment into the landlocked country.

While the government initially reserved 40 percent of the refinery for itself -- with an option to sell part of that holding to other countries in the region -- it hasn't disclosed the share to be controlled by the consortium. Uganda will build a refined-product pipeline to Kampala and a crude-export pipeline through neighboring Tanzania.

--With assistance from Paul Burkhardt

To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Dylan Griffiths, Claudia Carpenter