Uganda which is highly vulnerable to oil price shocks as it imports almost all of its oil, discovered oil in 2006 and has an estimated 3.5 billion barrels of crude. However, the major problem with Uganda, classified as one of the world’s poorest nations by the World Bank, is that it lacks investment to build refineries so that production ensues.
According to new reports London-based Tullow Oil Plc (TLW), Cnooc and France’s Total SA (FP) are jointly developing the finds and may be in the future that the country has the fourth-biggest oil reserves in sub-Saharan Africa. The government according to Robert Kasande, an assistant commissioner in the Energy Ministry is willing to encourage local oil production.
He said that the investor can either be a company or a group of the companies with a common minimum agenda. The selection of the company will be completed by April next year. The government intends to provide close to 60 per cent share in the new business to the selected company for oil refining.
The refinery according to some estimates will have a capacity of 60,000 barrels a day. It is interesting that it was a joint effort from the Kenya and Uganda governments beginning from 1995, to investigate the possibility of extending the Mombasa–Eldoret pipeline, a further 320 km to Kampala which helped the country get oil supply.
However, that does not seem to fulfill the requirement of energy in the country and the new reserves found will be exploited to meet it. Nearly two weeks ago the country issued its first production license to China National Offshore Oil Corp. Interestingly, China is a playing vital role in the infrastructure development of the continent, and now with its oil companies it is trying to penetrate deep.
Talking about the new proposal Robert Kasande says that the country needs to finalize this process as it has started today by April. He added that the cost is still “tentative” as the accurate amount will be known after the investor conducts a feasibility analysis. Uganda has also invited Kenya, Rwanda, Burundi and Tanzania to buy an interest of as much 10 percent in the facility.
Earlier President Yoweri Museveni and his Kenyan counterpart Uhuru Kenyatta agreed to develop a pipeline to the Kenyan port of Lamu and for that the two countries are negotiating with oil companies. Uganda can be a good option for oil companies as it has sub-Saharan Africa’s biggest oil reserves after Nigeria, Angola and South Sudan.
To contact the reporter of this story: Jonathan Millet at john@forex,minute.com