Uganda Draws Up Plan for National Oil Company to Steer Industry

Uganda, the East African country seeking to pump its first oil, drew up plans for a national energy company to control as much as a fifth of crude output.

The company will start operating after the president names the board and the directors are approved by parliament, the Energy Ministry’s Petroleum Exploration and Production Department said in an e-mail.

Uganda is putting in place a state oil company as foreign producers develop fields estimated to hold 3.5 billion barrels of crude. Tullow Oil Plc (TLW), which found commercial deposits in the country in 2006, has said it plans to start “small-scale” output next year. London-based Tullow is working with China National Offshore Oil Corp. and France’s Total SA.

“Production-sharing agreements provide for state participation of between 15 to 20 percent during production,” the department said yesterday. “It is the national oil company that will take forward state participation.”

Tullow and its partners are negotiating with the government to build an export pipeline to Kenya’s coast as well as a refinery. Funding for the plant will be 60 percent private finance and 40 percent public, and the national oil company will hold the government’s interest, the ministry has said. The U.S.’s Taylor-DeJongh Inc. is advising on the financing.

The government agreed with the oil companies in April to build a 30,000-barrel-a-day refinery, and has pushed for a subsequent upgrade to as much as 60,000 barrels depending on new crude discoveries. Licenses for 60 percent of Uganda’s exploration area are yet to be awarded, the ministry said.

Peter Lokeris, minister of state for mineral development, said May 27 that more than 40 companies had shown an interest in the refinery project. Production at the plant may start in 2015 or 2016, according to the government. That’s earlier than Total’s projection of 2017.

To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net.

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