Tullow calls on government to break impasse over Uganda's oil development

1/25/2013

Tullow calls on government to break impasse over Uganda's oil development

BY NICHOLAS BARIYO

KAMPALA -- Tullow Oil Uganda, a unit of Tullow Oil, called on the government of Uganda to break the impasse between it and its corporate partners over the development of the country's oil fields in the Lake Albertine rift basin.

Ugandan government has withheld its approval of the basin's oil development plan for almost a year, pending the resolution of a number of issues, chief of which is the government's insistence that a large oil refinery be built as part of the project. Almost a year ago, the government approved Tullow's long-delayed $2.9 billion agreement to split its oil licenses with Total and Cnooc.  However, the three joint-venture partners have faced a litany of problems which continue to push back the planned start of production. While Tullow, Total and Cnooc want to sell crude on the open market, they are mulling $5 billion of investment in pipelines to the East African coast. On the other hand Uganda insists that most of it should be refined locally into fuel products, initially for domestic consumption and then for regional export. The government maintains that over the longer term, Uganda's economy would earn more from exporting refined oil than from selling crude to refineries abroad.

"We are still examining the development plans, they (the companies) still have to meet certain requirements before we approve... hopefully this will happen very soon," Peter Lokeris, Uganda's junior energy minister told Dow Jones Newswires. While the three had initially agreed to help fund a small 20,000 bopd refinery at an estimated cost of around $1.5 billion, Uganda now wants them to build a larger facility, capable of producing around 150,000 bopd of refined fuel products.

Tullow, Total and Cnooc are planning to spend at least $12 billion to develop the country's oil fields.

Dow Jones Newswires

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