Russia’s Big Step in the Oil Industry of Uganda
By admin February 21, 2015

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RT Global Resources, the subsidiary of a Russian state conglomerate—Rostec, recently won the tender contract for constructing the first oil refinery in Uganda. With an investment scale of $3 billion, this oil refinery is expected to produce 60,000 barrels a day once completed in 2020.

There were 75 candidates involved in competing for this contract, including UK’s Tullow, France’s Total and China National Offshore Oil Corporation (CNOOC). According to Fred Kabagambe-Kaliisa, the permanent secretary in the Ministry of Energy and Mineral Development in Uganda, Rostec was chosen because it could better meet the requirements of the government, such as contributing to the private share and operating plan.

At the same time, it is said that geopolitics is another important reason for this decision. Russia and Uganda have over fifty-years of relations with each other. There are a lot of trade activities between these two countries. Uganda even has bought over 700 million dollars worth of fighter jets from Rosoboronexport, which is a subsidiary of Rostec as well.

Under this environment, the cooperation between Russia and Uganda in this project then becomes more than natural. It will not only contribute to the development of Uganda, but also provide a very promising platform for Russia in terms of promoting further cooperation in other fields and obtaining the benefit from the development of East Africa.

Obviously, Rostec has a very close relationship with the Russian government as it has a large presence in the military industry. That’s why Sergei Chemezov, the CEO of Rostec, has been subject to the sanctions from the United States and European Union since Russia’s military strike in Ukraine, which was against the interest of Western countries.

It seems that the sanctions have no affect on the project in Uganda. However, Uganda’s choice of partnering with Russia, especially within the oil industry, could harm its global status and hinder western countries’ willingness to provide monetary or other assistance, adding to the uncertainty about the sustainable development of Uganda.

It was not until 2006 that oil was discovered in Uganda. As a landlocked country, Uganda needs to pay a very high transportation fee when importing the fuel from seaports. Since it is so expensive and inefficient, Uganda has been thinking of building its own oil refinery. Besides meeting the domestic demand of oil, the self-owned refinery could create a large amount of job positions and also produce the material for electricity generation to alleviate the electricity shortage in rural areas.

Nevertheless, those who are against this decision argue that it might not be cost efficient enough considering the potential contamination and long investment period. In addition to that, the current drop in oil prices puts more pressure on oil companies like RT Global Resources, especially in the aspect of their investment budget, which could hinder the implementation of the tender contract and future production plan.

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