7 February 2014

Uganda: Govt Signs Development Deal With Major Oil Companies

Photo: Premium Times
Oil refinery

Kampala — After years of negotiations, the Uganda government has finally signed a deal with three major oil companies for development of its petroleum reserves.

On Thursday Uganda's Ministry of Energy announced that it had signed a memorandum of understanding with the U.K.'s Tullow Oil, France's Total and China's Cnooc, paving the way for the development of the oil reserves recently discovered in western Uganda.

The government had been in talks with the oil majors for years, but until this week no agreement had been reached.

Gloria Sebikari of the ministry's petroleum department says the deal with the three companies should lead to more than just development of the oil fields themselves.

"It's a significant step, because this memorandum of understanding gives a road map for commercialization of the petroleum resources that are being discovered in Uganda," she said. "The plan provides for use of petroleum for power generation, supply of crude oil to the refinery to be developed in Uganda, and then export of crude oil to an export pipeline or any other viable option to be developed by the oil companies."

Energy Minister Irene Muloni told reporters Thursday that the companies had already invested up to $3.5 billion in exploration.

But the timeline for commercial production of Uganda's oil has already been pushed back several times. Sebikari says it will still be at least two years before the black stuff is pumped out of the ground.

"The initial plan is to have crude oil for power generation, and we are thinking this can be achieved by 2016. But commercial production to the refinery should be by 2017 [or] 2018 because that's when we see the refinery being in place," said Sebikari.

Kenya and Uganda had also discussed building a pipeline from South Sudan's oil fields to the Kenyan coast. But the conflict in South Sudan has put those plans on hold.

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