Total set to retain major oil license in Uganda after new discovery
BY NICHOLAS BARIYO
KAMPALA -- Total is set to retain a major oil license in Lake Albertine Rift basin, after striking a new oil discovery following months of extensive drilling activities. The development is a major boost for the prospects of the company's operations in Uganda, where the exploration license for the block-1A that was discovered was made was due to expire next month. Total has confirmed the discovery of hydrocarbons during the drilling of the exploration well Lyec-1 in block 1A but the discovery requires further appraisal to determine its potential. Details about the size of the discovery are expected in the next few weeks. Total has asked the authorities to renew the license, given that the license comes to an end in February 2013.
Total had drilled three dry wells in the block before striking oil. The license would have reverted to the government if the company had failed to discover oil before February. Total co-owns the license with Cnooc and Tullow Oil. Total said early last year that it would spend $300 million on exploration and appraisal programs in Uganda. Tullow had controlled the entire oil acreage comprising three oil blocks in the Lake Albert area until February last year, when the government finally approved a long-delayed $2.9 billion deal to split the oil licenses with Cnooc and Total.
Total operates blocks 1 and 1A located in the northern section of the rift basin, Tullow operates block 2, which straddles Uganda's Hoima and Bulisa districts, and Cnooc operates the Kingfisher oil fields located at the southern tip of Lake Albert. The three companies are expected to invest around $10 - 12 billion to develop the oil fields, but they remain embroiled in a spat with the government over the fields development plans and refining options, which continue to push back the planned start of production.
While the companies want to sell crude on the open market, Uganda insists that most of the oil be refined locally into fuel products, initially for domestic consumption and then for regional markets.
Total said last year that it expects to start Uganda oil output in 2017, a year later than previous projections.
Dow Jones Newswires