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Total, Tullow, Cnooc Sign Uganda Deal for Oil-Output Use

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Feb. 6 (Bloomberg) -- The government of Uganda, home to sub-Saharan Africa’s fourth-largest oil reserves, signed a deal with Tullow Oil Plc, Total SA and Cnooc Ltd. on a refinery and pipeline that may clear the way for the start of crude output.

The agreement details plans for the initial use of oil flows in power generation before a refinery is built probably by 2018 along with an export pipeline, Energy Minister Irene Muloni said today, according to an e-mailed statement.

“The conclusion of the MOU is a significant step as it gives a road map for the commercialization of petroleum resources discovered in the country,” Muloni told reporters today in the capital, Kampala.

Significant output of oil, which was first discovered in Uganda in 2006, is expected by the government to start by 2016 after a series of delays. One reason for the lack of progress has been wrangling between Uganda and the oil companies about how much crude to process locally or export through a pipeline.

Uganda has an estimated 3.5 billion barrels of crude, according to the Energy Ministry, with Tullow, Total and Cnooc planning to tap the country’s Lake Albert fields. Uganda has sub-Saharan Africa’s biggest oil reserves after Nigeria, Angola and South Sudan, according to the International Monetary Fund.

The memorandum of understanding requires the three oil companies working together to “support” plans to develop a refinery in Uganda. It also obligates the government to help examine construction of a pipeline from the landlocked country in cooperation with neighboring nations, she said.

First Call

The plant will have a processing capacity of 60,000 barrels per day, which can be expanded, and get “first call” on oil produced at licensed areas,’’ Muloni said. The companies may also choose to export the oil using “any other viable option,” she said, without providing more details.

Uganda’s Energy Ministry said in December that China Petroleum Pipeline Bureau and London-based Petrofac Ltd. were among six companies shortlisted to build the country’s first oil refinery at cost of $2.5 billion. The leading bidder is expected to be announced in the first half of this year, it said.

The lead investor will own 60 percent of the plant, while the government’s stake will account for as much as 40 percent. The nation has invited Kenya, Rwanda, Burundi and Tanzania, partner countries in the East African Community, to buy an interest of as much 10 percent, according to the ministry.

Ugandan President Yoweri Museveni and his Kenyan counterpart Uhuru Kenyatta agreed last year to develop a pipeline to the Kenyan port of Lamu, with a loop to South Sudan.

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

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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