France’s Total SA is poised to keep a major oil license in northern Uganda’s Lake Albertine Rift Basin, it was revealed on Friday, following another oil discovery there late last month.
For oil companies like Total, keeping a major oil license is like making a huge acquisition because it means a major earnings boost.
According to the Wall Street Journal, (WSJ), the discovery of oil in that part of Uganda is a major boost for Total, whose exploration license for that block, known as 1A, was due to expire in February this year.
Honey Malinga, the assistant commissioner at Uganda’s state-run Petroleum Exploration and Production Department, told WSJ the discovery would also boost the size of the country’s crude reserves, currently estimated at 3.5 billion barrels.
When billions of barrels of oil reserves were found in Uganda five years ago, the discovery seemed like a gift from heaven to many in this poor, landlocked country.
Yet there are growing worries that the oil may prove to be more of a curse than a gift, similar to the fates of other countries in sub-Saharan Africa that have joined the petroleum bonanza.
Uganda is considered by international experts to be among the most corrupt nations in the world and even before oil production has begun, several senior government officials, including the prime minister, have been accused of pocketing millions of dollars in bribes from oil companies, forcing at least one of the politicians to resign.
“Total will automatically retain the license,” Malinga was quoted as saying. “We have asked them to apply for an appraisal and production license for the block.”
Total spokesman, Florent Segura, said the discovery required further appraisal to determine its potential. Details of the size of the discovery were expected in the next few weeks.
Total—which co-owns the license with China’s Cnooc and UK-listed Tullow Oil—had drilled three dry wells in the block before striking oil in the fourth late last month.
In October, Uganda took back control of another oil block, Kanywataba, from the three joint-venture partners after their exploration license expired before a discovery.
Early last year, Total said that it would spend $300 million on exploration and appraisal programs in Uganda.
With a series of huge oil discoveries along its western border with Congo, the country is set to join Nigeria, Angola and Sudan among sub-Saharan Africa’s major crude producers.