UGANDA: UK-based oil explorer Tullow Oil plans to spend up to 750 million US dollars this year, part of 10 billion US dollars, together with its partners, before Uganda's oil sector goes into full-scale production phase

Record ID: 344198

  • Title: UGANDA: UK-based oil explorer Tullow Oil plans to spend up to 750 million US dollars this year, part of 10 billion US dollars, together with its partners, before Uganda's oil sector goes into full-scale production phase
  • Date: 10th May 2012
  • Summary: TURKANA, KENYA (FILE) (REUTERS) VARIOUS OF OIL EXPLORATION SITE IN NORTHERN KENYA
  • Embargoed: 25th May 2012 13:00
  • Keywords:
  • Location: Uganda
  • Country: Uganda
  • Topics: Business,Energy
  • Reuters ID: LVA7Z6B7EFGAIRTOGAAU0ZBN0DO1
  • Story Text: UK-based oil explorer Tullow Oil plans to spend up to 750 million US dollars jointly with its partners in exploration and further drilling in Uganda this year as the east African country races to begin crude production.
    In February, Tullow, France's Total and China's CNOOC completed their long delayed $2.9 billion partnership venture that gave each of them a one third stake in Tullow's five Uganda exploration blocks.
    Eoin Mekie, Tullow's Uganda country manager, said the firm also expects to get its first production licence by the close of this year as they proceed with appraisal drilling to determine the size of their oil wells after initial discovery.
    Mekie said this year's planned investment was part of the 10 billion US dollars that the three companies expected to spend before Uganda's oil sector goes into full-scale production phase.
    "To take this to its full extent with full production through a pipeline, through a refinery etcetera , you are talking 10-15 billion (US dollars) but that is spread over the next five, six, seven years - drilling of wells, construction of infrastructure, pipelines to carry the oil from the wells to the facilities then to take it from the facilities to the market place be that refinery, be that pipeline or what ever, construction of the pipeline, construction of the refinery," he said.
    Commercial oil production in Uganda is likely to begin in 2014 with full-scale output seen around 2020, he said.
    Uganda discovered commercial hydrocarbon deposits along its border with the Democratic Republic of Congo in 2006, and Tullow says reserves of 1.1 billion barrels are confirmed in place and believes there are a further 1.4 billion barrels left to find.
    On plans by Uganda to build a refinery, Mekie said a capacity exceeding 60,000 barrels per day (bpd) would make the refinery unviable because Uganda would not find enough regional market to buy the fuel.
    Uganda is eyeing a refinery that begins with a capacity of 20,000 bpd, enough to meet local demand, to be ramped up to reach a peak capacity envisaged at 200,000 bpd to meet international demand.
    "A right size of a refinery is the key to unlocking this. A refinery in Uganda is the right way to go, what we have not agreed with is that refinery should refine all the crude produced in Uganda. We still see that from a commercial perspective but also from economic benefit perspective, a crude export pipeline also giving Uganda access to the international markets is essential," he said.
    Uganda and its neighbours in east Africa, as well as the Horn of the continent, have become a hot spot for oil and gas exploration in recent years, spurred by new finds in countries including Kenya, Tanzania and Mozambique.
    Mekie said the oil countries have to work together to fully maximize the potential revenue for finds and share infrastructure.
    "Geology suggests that there is a good chance that there will be discoveries in many if not all of these countries. If the countries do not come together and many are these are land locked, Ethiopia, Southern Sudan, Rwanda, their route to market given the right size of discoveries is through... is to coast line, through Kenya, through Tanzania. If you compete over infrastructure, it will be inefficient," he said.
    Worldwide rig shortage is delaying oil drilling in east Africa, which is slowing growth and pushing up costs in one of the industry's hottest new exploration areas, industry players and officials said in April.
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