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Foreign Oil Companies Near Commercial Output in Uganda

International oil companies have moved one step closer to launching commercial crude production in Uganda as the government announces the finalization of talks with foreign oil explorers and a licensing round is expected to open later this year.

Major operators in Uganda—including Tullow, Total and China’s CNOOC—are set to sign a memorandum of understanding (MOU) with the government of Uganda for the development of 20 oil fields in equal-partnership ventures.

Each of the companies are set to serve as the operators of three blocks.

Uganda’s oil development plans also include a 60,000-barrel-per-day refinery, a crude export pipeline to Kenya's northern port of Lamu and a crude-fired electricity plant.

Resettlement of people living in the area earmarked for the refinery has been completed. This will be followed by publication of a regulatory framework for the sector, and a licensing round for interested bidders is expected to be launched this year.

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Agreement over the refinery and pipeline had stymied further development of Uganda’s oil fields. The government’s recent decision to agree to a shared East African pipeline connecting inland countries Kenya’s Lamu port for utilization of Uganda, Kenya and South Sudan has revived regulatory discussions.

Uganda has been seeking foreign partners to invest in the refinery’s construction, and has now shortlisted eight companies for the project.

“It’s a significant milestone since the market framework is critical for the commitment of project financing,” Uganda’s Energy Minister told reporters.

Earlier this month, the Ugandan government noted it had received applications for the development of 10 oil fields in the Lake Albertine Rift Basin.

Uganda made its first big find in 2006, but development to the production stage here has lagged far behind some of the other emerging East and West African favorites, particularly Angola and Ghana, and potentially Kenya, where things will move faster once commercial viability is established.

Related article: Oman and BP Finalize Gas Deal, Signaling Regional Change

Uganda contains sub-Sahara Africa's fourth-largest amount of oil reserves, behind South Sudan, Angola and Nigeria. Uganda has 3.5 billion barrels of crude oil.

East Africa has been identified as the next oil and gas production frontier with more than four countries in the region announcing oil and gas finds; Kenya and Ethiopia being the latest.

An acceleration of oil-related activity is likely to drive faster GDP growth in Uganda in the years ahead, although first oil is not expected until 2017 or 2018 at the earliest.

By. Charles Kennedy of Oilprice.com




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