Chinese contractor pulls out of Ugandan refinery deal

Uganda’s plan to refine its own recently discovered oil has taken yet another hit with the news that a Chinese company has pulled out of a deal to build the country’s first refinery.

It has emerged that China Petroleum Engineering & Construction Corporation (CPECC) wrote to the government of President Yoweri Museveni in June saying it had pulled out of the deal, reports Ugandan newspaper The Independent.

CPECC is the second contractor to walk from the historic $4bn project. As GCR reported, the Ugandan government last year suspended a deal with Russian consortium RT Global Resources to build the refinery.

The refinery is thought to be planned for the eastern shore of Lake Albert (pictured), in western Uganda.

CPECC was part of a Chinese consortium assembled by a Chinese group in Uganda, Dongsong Guangzhou Energy Group.

The consortium had beat three other contenders including an American-led consortium including General Electric and Saipem, the Italian oil and gas contractor.

The Independent did not report the reason for CPECC’s departure, but said "frustration over in-fighting, intrigue and lobbying had already taken root with cabinet officials, President Yoweri Museveni’s relatives, diplomats and senior technocrats at the Energy Ministry".

CPECC’s departure is a major set-back for the refinery, comments the Independent, because it is affiliated to China National Petroleum Corporation (CNPC), the world’s third largest oil company.

From 2006 a series of oil discoveries put Uganda on the global energy map, and by 2014 its government was estimating that there were between 1.8 billion and 2.2 billion barrels under Ugandan soil, notes a 2015 report by Oxford Institute for Energy Studies.

Image: A giraffe on the shores of Lake Albert, Uganda, where the refinery is planned (Bernard DuPont/Creative Commons)