America, China in US$ 4bn Uganda refinery deal race

In October last year, The Independent reported how in a major twist of events, an American company was one of those looking to invest in the oil refinery.

At the time, our source offered no details. But even then, there was major buzz about the unidentified America oil company. Sources intimated that there was a sense that President Museveni was looking to offer the deal to the Americans because the oil deal between Uganda and the Russians had become a big concern.

A military source even claimed that the Americans had tried to jeopardise this deal (refinery) by all means because of the involvement of the Russians.

Americans gain upper hand

At the time, at a press conference at The American Embassy in Kampala in 2015, this reporter asked then U.S. ambassador, Scott De Lisi, his view on Uganda awarding the contract to the Russian consortia, of which one of the bosses of the company, Sergei Chemezov, faced U.S. and EU sanctions.

De Lisi said: “These (sanctions) are issues I am sure the government will have to look at carefully. They have designated a Russian company as the first on the list, absolutely, but they still have to negotiate a variety of issues that will go to financing and the rest. The (problems) maybe because of the sanctions imposed upon the parent company. There may be problems in terms of financing, inability to operate but we will see how all that plays out.”

He was referring to the sanctions the E.U and U.S. imposed on Rostec and VTB, which were part of the refinery deal. Rostec suffered a 14 percent drop in profits in 2014 as a result of these sanctions.

At the time, there was a buzz around the Uganda-American relations. In September 2016, the U.S. Department of Defence announced it would supply the Uganda army with five Huey II helicopters sourced from the American firm, Bell Helicopter. The deal was valued at US$79 million.

The following month, the media in Uganda had also been awash with a congratulatory message sent to Museveni by U.S. Secretary of State John Kerry on behalf of U.S. President Barack Obama on the occasion of the 54th Independence Anniversary celebrations.

In an unusual move, the U.S praised Museveni on his human rights record and offered a promise of more support.

However, there remained pessimism given that previous attempts by America to work on big projects with Museveni, including the construction of the Bujagali Hydropower Dam—in the case of AES—had floundered over allegations of corruption and stringent World Bank conditionalities. Nevertheless, America’s Blackstone, is the majority shareholder in Bujagali Electricity Ltd (BEL) through Sithe Global Bujagali Holdings (SGBH), domiciled in Mauritius.

American companies have also over the years picked contracts in Uganda’s oil sector but they have mostly been small. America’s Taylor-DeJongh (TDJ), was hired as the Transaction Advisor on the oil refinery.

As Taylor-DeJongh advised government on the refinery, an American law firm, Curtis, Mallet-Provost, Colt & Mosle LLP, was representing the government in oil tax disputes, Heritage Vs Uganda in London and Tullow Vs Uganda in the U.S.

In the Albertine Grabben, it is American Logistics giants; Halliburton, Baker Hughes and Weatherford (also started in America) that are running the show, sinking their monster excavators and rigs to drill for oil as the biggest engineering service providers of the oil companies.

Texas-based Gulf Interstate Engineering (GIE) also got a contract from Total to carry out the feasibility study for the oil pipeline and was in January awarded another contract to carry out the design for the same.

However, the bigger prize would have been taken by oil giant ExxonMobil had the deal not collapsed. Cables leaked by Wikileaks showed that ExxonMobil Executives flew into Kampala and together with then U.S. Ambassador Jerry Lanier, lobbied Ministry of Energy officials for a multi-billion dollar deal between the company and Tullow.

But the deal failed and instead Tullow farmed down to CNOOC and Total. Insiders say that after losing the deal the Americans threatened to overthrow President Museveni. That is how much they needed the deal, a government official told The Independent.

Some insiders even say that President Museveni has been looking to award such a contract to an American company to make up for that past experience. If this thinking holds any water, the timing also favours the Americans.

It comes at a time when President Museveni is increasingly getting uneasy with the Chinese. The Chinese who previously have been funding such major projects appear reluctant to pump more money into the Uganda economy because debt is piling, and they have concerns about its sustainability.

The refinery has featured prominently on the agenda of President Museveni’s trips to Iran, Russia and South Korea. Perhaps the most recent sign of Museveni’s determination to have a refinery was in August last year. Museveni on a trip to Chad to attend the swearing-in ceremony of President Idriss Debby, who had just been re-elected, travelled with petroleum engineers, Irene Batebe and refinery engineer Benjamin Ariho.

While there and in the company of Chad’s minister of Petroleum, Mines and Energy, Djérassem Le Bémadjiel and the Ugandan engineers, Museveni was flown to tour Chadi’s $ 4 billion Djarmaya Oil Refinery moments after arrival in N’Djamena, the country’s capital. Hopefully, with Museveni’s hands- on involvement, the refinery deal can go ahead without a hitch.

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