Nairobi — New discoveries of commercial oil reserves in Uganda can sustain production of up to 100,000 barrels a day for 25 years, says the Ministry of Energy and Mineral Development.

It adds that the government entered into a memorandum of understanding with Tullow Oil in September 2006 for an early production scheme based on an estimated 11 million reserves of oil discovered in Kaiso-Tonya area, western Uganda.

More reserves were found following 100 per cent success in exploration and appraisal drilling.

It is now estimated that the recoverable reserves in the Albertine Graben are over one billion barrels of oil.

The amount is expected to increase with further exploration, the recent statement by the ministry to parliament says.

"In view of larger reserves and the reduced international oil price that would render very small developments of the size of the original early production scheme (EPS) uneconomical, the government is in discussions with the licensed oil companies to consider using gas generation and an expanded EPS to be implemented in a short to medium term," the ministry said.

"The government is executing a feasibility study for full scale refining to supply the national and regional demand, which is estimated at 150,000 barrels a day and growing at a rate of 6 per cent."

The production and refining of oil in the country is planned to be taken forward along two parallel lines.

These are the short to medium term; that is, a modified EPS; and the other is the development of full scale refining in the long run, the statement says.

Uganda had originally planned to embark on an EPS with four components: A modest production of 4,000 barrels of oil a day to supply stabilised crude oil; a topping plant (mini-refinery) to process crude oil to produce diesel, kerosene and heavy fuel oil (HFO); a generation that would use HFO in part or in full to generate 50-85 megawatts (MW) of electricity and a 273 km transmission line from Kaiso-Tonya through Fort Portal to Nkenda sub-station near Kasese.

The statement continues: "In the short term, the early production scheme is being reviewed to take into consideration the additional discoveries made and take advantage of improvements in the economies of scale of expanding it.

"Plans are now being made to commence power generation using gas in the short term and increase the small scale production and refining of oil earlier planned for the EPS to a scale of 1,500-3,000 bpd. The target is to achieve production by the end of 2010."

A feasibility study is to be undertaken for a refinery initially to produce 50,000 bpd, which will be expanded to 100,000 bpd.

The proposed scheme will include: A refinery producing diesel, petrol, heavy fuel oil, gas and kerosene for the local market; 100 MW power plant from gas and HFO, and a 273 km transmission line from Kaiso-Tonya through Fort Portal to Nkenda sub-station, near Kasese.

The ministry said that efforts by the government to promote the country's petroleum potential and attract investment had been successful.

Four international oil companies have been attracted, including Heritage Oil and Gas Ltd, Tullow Oil Plc, Neptune Petroleum (Uganda) Ltd and Dominion (Uganda) Ltd.

By the end of 2008, the cumulative investment in the sub-sector, mainly in the acquisition of seismic data and drilling of exploratory wells, was over $560 million.

Out of the nine exploration areas established on the Albertine Graben, five are licensed to oil companies.

The National Oil and Gas Policy, which was approved by the Cabinet in January 2008, provides the guiding principles in the value chain and institutional framework for prudent management of resources.

The goal of the National Oil and Gas Policy is to use the country's oil and gas resources to contribute to early eradication of poverty.

The policy recommended the utilisation of resources discovered to implement an early production scheme to address the country's power shortage.

The policy further recognises the need to refine additional oil resources discovered to meet the demands of the country and the region before consideration of any export.

Meanwhile, attention is needed to environment protection and conservation, occupational health and safety, infrastructure development like roads and physical planning, among other areas.