Uganda and two companies exploring its oil prospects have reached a deal on the production value chain of the country’s oil.

An agreement between China National offshore Production Company, Tullow Oil and Uganda will see the country construct a small oil refinery, a crude oil export pipeline connecting to Lamu in Kenya, and a power plant for electricity production.

The deal is a follow up on a decision by Uganda’s president Yoweri Museveni and Kenya’s Uhuru Kenyatta to have a shared East African pipeline connecting inland countries in the region to the Kenyan port of Lamu — this pipeline will be used by Uganda, Kenya and south Sudan.

As indicated by the Uganda’s Energy Minister Eng. Irene Muloni at a farewell party for Tullow’s outgoing president Elly Karuhanga, “It’s a significant milestone since the market framework is critical for the commitment of project financing”.

The country has been looking for partners to invest in the construction of a 60,000 bpd oil refinery in its western region, and has already shortlisted eight companies one of whom will be selected.

Speaking at the same event Tullow Oil Plc.’s Executive Director and Company secretary Graham Martin revealed that Uganda’s oil production is expected to average 220,000 barrels a day from recoverable reserves of 1.7 billion barrels, from a an estimated discovery of 3.2 Billion barrels.

Of the two companies that negotiated the deal with the Ugandan Government, CNOOC has already been granted a production license while Tullow oil is still in negotiations for the a production license, and is fronting its success in Ghana where Martin says it has delivered over $5 billion to the Ghanaian taxpayer and “have a solid track record as a partner in Africa’s development.”

“We can do the same here,” he adds.

So far, Tullow oil Uganda has invested $2.8 billion and expects to invest between $15-22 billion more in the country, the company’s General Manager, Jimmy Mugerwa said.

The company also expects to put over $50 billion in Uganda’s tax coffers over 20 years.

East Africa has been identified as the next oil and gas production frontier with more than four countries in the region announcing oil and gas finds; Kenya and Ethiopia being the latest.

Last week, Tullow announced another discovery in Kenya.