UGANDA: Agreement signed paving way for first oil development

Record ID: 343373

  • Title: UGANDA: Agreement signed paving way for first oil development
  • Date: 16th March 2011
  • Summary: LAKE ALBERT, WESTERN UGANDA (FILE) (ORIGINALLY 4:3) (REUTERS) VARIOUS OF TULLOW OIL EXPLORATION SITES NEAR LAKE ALBERT IN WESTERN UGANDA
  • Embargoed: 31st March 2011 13:00
  • Keywords:
  • Location: Uganda, Uganda
  • Country: Uganda
  • Topics: Energy
  • Reuters ID: LVA1RLFGT1A0KWMCEK2RD7Q66F8O
  • Story Text: Uganda signed a memorandum of understanding (MOU) with Tullow Oil on Tuesday (March 15) to let the oil explorer proceed with a 10 billion US dollar project to develop the east African country's oil reserves.
    Tullow bought stakes in two oil licence blocks from former partner Heritage Oil early last year for 1.45 billion US dollars.
    However, a long-standing wrangle over capital gains tax on the sale had stalled Tullow's development plans.
    The London-based explorer had been waiting for formal approval from Uganda to bring in new partners, French oil major Total and Chinese group CNOOC, to develop the fields in the Albertine Rift basin.
    The basin is divided into 10 exploration blocks covering thousands of square kilometres. The Ugandan government estimates reserves at 2 billion barrels but says they could be far higher.
    Speaking at the signing of the MOU, Ugandan Energy Minster Hilary Onek said the government would receive 469 million US dollars in taxes by the end of March as a result of the agreement.
    "I want to assure all Ugandans that this is the first time the oil sector has earned a considerable fund and by the end of this transaction the Ugandan government would have earned a sum of nine hundred million dollars even before the oil has been produced and we are looking forward to early production of this oil so as to enable us strengthen our economy," he said.
    The MOU is conditional on Tullow signing sale and purchase agreements with Total and CNOOC within 10 working days.
    Country manager for Tullow Brian Glover, said he was pleased the MOU meant they could finally move forward.
    "What the MOU does, the Memorandum of understanding set a very clear road way which means now we can now complete the acquisition of Heritage and firm down to our new partners Total and CNOCC and this will be carried out over the next ten working days and then more broadly it means we can get on with the business of completing with the business of completing our appraisal program and then finalising development so that oil can be produced in Uganda for the very first time," he said.
    On the streets of Kampala, news of the agreement was greeted with a mixed response.
    Some like resident Watualuma Besweri said it marks a landmark in the nation's history.
    "The signing of that agreement is a head way to the development of this country," he said.
    While others like resident Daniel Walusimbi said it would only be good news for the country if the foreign companies controlling revenues make sure their profits are shared out.
    "All Ugandans actually should benefit from this oil, I have read about the likes of Equatorial Guinea and the likes, the oil benefits a few of the individuals who are in that country, the big men, they always go ahead and make contracts that benefit their stomachs and their relatives and few men have money," he said.
    Shares in Heritage Oil fell more than 14 percent on Tuesday (March 15) while Tullow Oil was down 1.5 percent, off earlier lows.
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