Years after the discovery of oil in Uganda, the country has signed an agreement with three major oil companies: Tullow in Britain, Chinese National Oil Offshore Company (CNOOC) and France’s Total as it prepares for commercial production.
Uganda discovered oil in the Albertine Graben basin in 2009, but production and commercialization was delayed because of its insistence to refine oil before exportation.
The eventual signing of the deal represents an important milestone for the country and it initiates the genesis of a transformation that hopefully will create a ripple effect on other sectors of the economy.
“The conclusion of the MOU is a significant step for Uganda as it gives a road map for achieving a harmonized commercialisation plan for the development of the discovered oil and gas resources in the country,” Irene Muloni, the minister for Energy and Mineral Development said.
The terms of agreement states the outline for the commercial production of oil which includes using the hydrocarbon deposits for gas resources, provision of oil to the refinery the country will build and the exportation of oil through a pipeline that will be built by the partnering oil companies.
Although the government expects to use crude oil to generate domestic gas and electricity by next year, the refinery is not expected to start operations until 2017 and is estimated to produce an initial 30, 000 barrels per day which is expected to double to 60, 000 barrels per day after a few years of operations.
According to Muloni, the cost of developing the country’s oil fields and building infrastructure is valued between $15 billion and $22 billion but there were plans to work on reducing the cost.
Six companies have been shortlisted to build the refinery and the government is expected to announce who takes the lead later in the year while for the construction of the $4 billion pipeline that will be used for exportation, an agreement has been reached with Kenya and South Sudan since the pipeline will link to the Kenyan port of Lamu and connect with another carrying oil from South Sudan.
Jimmy Mugerwa, General Manager of Tullow Uganda described the event as a “key milestone in the transition of Uganda’s oil industry from the exploration phase to the development phase.”
With the memorandum underway, hopefully both parties will commence with their responsibilities and the people of Uganda can begin to benefit from the rewards of oil production and exportation.