Russian firm walks away from Uganda oil refinery deal

Oil workers at Kigogole-5 oil well in Buliisa District.

Oil workers at Kigogole-5 oil well in Buliisa District.

A Russian consortium Rostec Global Resources (RTGR), which was announced as the best preferred bidder for the financing and construction of the $4 billion greenfield oil refinery in Hoima in western Uganda has walked away from the deal.

Ugandan government on Friday said it had halted negotiations with RTGR for selection of the lead Investor of the Uganda Refinery Project.

“The Government team had shortlisted two bidders namely RTGR which was ranked as number one and the Preferred Bidder and the other led by SK Engineering of South Korea ranked as second and Alternate Bidder. The Government of Uganda has been in negotiations with the RT-Global Resources Consortium for the last 14 months,” said a statement issued by Permanent Secretary, Ministry of Energy and Mineral Development Dr. F.A. Kabagambe-Kaliisa.

According to government, final agreement was reached in principle in May this year.

However, just prior to the expected signature date at the beginning of June 2016, the RT-Global Resources Consortium reportedly made additional demands from the Government, seeking to reopen and renegotiate issues that had already been agreed between the parties.

“Consequently Government was left with no choice but to halt negotiations and draw the bid bond. Government is now proceeding to invite the Alternate Bidder – SK Engineering & Construction for negotiations,” Dr. Kabagambe further said.

Under sanctions?

According to a Global Witness Report in August 2015, RT Global Resources, a wholly owned subsidiary of giant state owned Russian arms and industrial company Rostec whose CEO, reported to be a former KGB officer and close associate of Putin, is on the EU and US sanctions list.

Both RT Global Resources and Telconet are also involved in the consortium, which was selected as the preferred bidder for the refinery deal.

Rostec’s subsidiary Rosoboronexport has a monopoly on all Russian state arms exports and is responsible for 85% of all Russian arms exports.

In 2011, Uganda bought six fighter jets from the company estimated to be worth over US$700 million.

The country has also bought 44 T90S tanks from the same company.

The Ugandan Government should clarify whether there is any relationship between the refinery deal, the upstream bidding round or arms deals.

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