Kenya acquires Sh5.6bn stake in Uganda refinery


Energy and Petroleum principal secretary Joseph Njoroge. PHOTO | FILE

Kenya has agreed to acquire a 2.5 per cent stake in the planned Uganda oil refinery for an estimated Sh5.6 billion.

Energy and Petroleum PS Joseph Njoroge on Monday said Kenya would take up the stake as part of a commitment among East African Community (EAC) member states to close ranks on projects that benefit the bloc.

“In line with the spirit of regional integration we committed to support each other in key infrastructure projects and we shall lend support to the Ugandan one. We shall take up a minimal 2.5 per cent stake in the refinery project,” Mr Njoroge told the Business Daily.

The facility is slated to process 60,000 barrels of oil per day and much of Uganda’s projected crude output is expected to be exported via a pipeline through Kenya, which is yet to be built.

Either a consortium headed by South Korea’s SK Energy Co. or another led by Russia’s RT-Global Resources—which are both currently locked in bidding for the refinery—will take up a 60 per cent stake in the project as well develop and operate it.

The Ugandan government had invited both Kenya and Rwanda to buy shares in the remaining 40 per cent stake.

Kenya will contribute capital equivalent to its 2.5 per cent stake, which is Sh5.6 billion based on the $2.5 billion set as the initial construction cost of the refinery.

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But construction charges could be revised by the final bidder of the project that will see Uganda add value to its crude output to maximise earnings from its hydrocarbon reserves, which were discovered in the country along its border with the Democratic Republic of Congo in 2006.

Uganda’s reserves are estimated at 6.5 billion barrels. The first phase of the refinery is expected to be ready in 2018.

Kenya’s commitment came as the deadline for the two consortia to submit final bids for the oil refinery lapsed on Monday, paving the way for the selection of a lead investor for the project by next month.

The Ugandan government last week said it held preliminary negotiations with the two consortia between August and September 2014 and issued with a Request for Final Offer (RFFO) with a submission deadline of Monday.

“Following the negotiations and issuance of the RFFO, the bidders will prepare and submit their refined technical, financial and commercial and legal offers,” said Kabagambe-Kaliisa, the permanent secretary in the Ministry of Energy and Mineral Development.

“They are expected to document their technical concept design for the refinery, project implementation and operating plans, national content policy and project management teams, among others,” he said.

The final offers will be evaluated by a team from the Ugandan government and project transaction advisor, Taylor-Dejongh and the winner picked next month.