Kampala — THE petroleum resources in the Lake Albertine Graben is about two billion barrels, the energy ministry has said.

Dozith Abeinomugisha, a senior geologist in the petroleum exploration and production department, said 34 wells had been drilled of which only two were dry.

"Out of the 34 wells drilled, 32 have encountered oil and/or gas. The total petroleum resources discovered in the Albertine Graben is close to two billion barrels of oil."

This amount is expected to increase with continued exploration and appraisal of discovered wells. Up to now, only 30% of exploration activities in the oil-potential area of western Uganda, stretching from Kanungu to Nebbi, have been completed.

"The total proved oil reserves might reach six billion barrels or more," said Abeinomugisha. This would put Uganda in the category of Sudan (6.4 billion barrels), above Gabon (2 billion), Chad (1.8 billion) and Equatorial Guinea (1.1 billion).

The resources are sufficient for commercial development, the official said. "The discoveries can support production of over 100,000 barrels of oil per day for twenty years and are sufficient to implement large-scale refining in the country."

Abeinomugisha was briefing journalists on a field trip to the southern part of the Rift Valley, where huge oil and gas reserves have been found. The areas visited included Rukungiri, Kanungu, Bundibugyo and Hoima districts.

The discovery of more oil has caused the Government to abandon the early production scheme, meant to start later this year.

Another reason for abandoning the project was the fall in international oil prices, which reduced the economic profitability of the initial scheme.

"It was, therefore, not economical to continue with the early production scheme and we said: why don't we plan for a bigger production?" said Abeinomugisha.

The production and refining of oil has to be taken forward along two parallel developments, according to the energy ministry. In the short term, the ministry is considering a modified early production scheme as it awaits the full-scale refinery, expected by 2015.

Three options are being considered, said Matovu Bukenya, the ministry's senior assistant secretary. One is to use the gas in the Kaiso-Tonya area to generate power.

About 14 million cubic meters of gas have been found at Nzizi-1 well.

The other possibility is starting with gas to generate power using a modular plant which could later be expanded to a mini-refinery with a capacity of 30,000 barrels of oil per day.

The long-term plan, Bukenya said, is the development of a medium-to-large refinery with a daily capacity of 150,000 barrels.

Such a refinery costs about $2b. To afford it, the Government, which wants a 50/50 partnership, would need $1b.

"A feasibility study is being undertaken to establish issues related to optimum size configuration of refinery, location of markets and possible financing arrangements," said Bukenya.

The Ugandan oil is of high quality, called sweet crude, as it has very little sulphur. However, it is also waxy and becomes solid below a temperature of 39 degrees.

"If you use a pipeline, you need to have it heated. It makes it costly to transport the oil over a long distance. It might be cheaper to refine it in Uganda than export it as crude oil," said Abeinomugisha.

Before production starts, another difficult issue needs to be sorted out, that of the sharing of revenues. Under the mining law, the Government takes 80% of the revenues, the local government 17%, while the land owner takes 3%.

"Parliament needs to come up with a proposal on how to share petroleum revenues as we don't have a law," said Bukenya.

The law will also decide on whether to make oil agreements public. "Some aspects of these agreements, if made public, would expose the parties to unfair competition," he noted.

Four oil companies are carrying out exploration in Uganda. The biggest, the Irish-owned Tullow Oil, has made significant discoveries in Kabwoya and Bugungu game reserves.

It is expected to hit the ground in three weeks at Ngassa-2 on the shores of Lake Albert.

The Canadian-based Heritage Oil, on its part, has made huge discoveries in Bugoma and Murchison Falls National Park.

Tullow Oil has a 50/50 shareholding in Heritage Oil Uganda. The other two companies, the UK-based Neptune and Dominion, are still searching for oil in West Nile and Lake Edward respectively.