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Uganda: Tullow Loses Congo Oil Exploration Permit
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The Monitor (Kampala)
7 May 2008
Posted to the web 7 May 2008
Angelo Izama
Kampala
Uganda's only partners in its nascent petroleum programme, Tullow Oil and Heritage Oil, have lost their exploration rights on the Congolese side of the border to South African state oil company PetroSa.
The decision by the Kinshasa government, which is being challenged by Tullow, has recast plans by Uganda and DRC to pursue joint exploitation of the oil fields.
The DRC authorities said the initial award to Tullow was irregular and was signed by a vice minister for Oil, Nicolas Bandingaka, who at the time did not have authority to do so.
Tullow paid a signing bonus of $500,000. In various interviews with financial news outlets yesterday, Tullow officials maintained their contract was lawful.
"Tullow was prepared to raise its signing bonus to $1 million," Mr Tim O'Hanlon, Tullow's vice president for African business, told Bloomberg financial news.
As long as Tullow and Heritage had the right to explore both sides of the Albertine Graben [which is the area around Lake Albert straddling the borders of Uganda and DRC], the Kampala government, which has a long relationship with the companies, could expect quick progress.
The Uganda government plans to build a mini-refinery on its side of the oil fields as early as next year and is in advanced stages of creating a state regulator and national oil company of its own.
In an interview two weeks ago, Energy Minister Daudi Migereko said the plans were on course to produce oil for the domestic market by Christmas next year.
However, the security situation at the border as well as the political relationship between Uganda and DRC has remained problematic.
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Border clashes last year left over 10 people dead and the Ugandan army threatening to invade.
The situation was calmed by a bilateral deal signed in Tanzania in September in which the countries recommitted to joint exploration. It is unclear what impact the entry of the state oil company of South Africa will have on confidence in the petroleum sector.
South Africa has long been a player in the security sector of DRC and the region. The Congolese government, according to reports, has continued to accuse Heritage and Tullow of colluding with the Uganda government, a charge which the accused deny. Heritage Oil's sister companies, including its defunct military consultancy business, Executive Outcomes, have also been based in South Africa.
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