(Reuters) – Uganda will sign oil production licences with France’s Total and Britain’s Tullow Oil by the end of the year as it seeks to start commercial production by 2018, the energy minister said on Thursday.
Uganda found commercial deposits of oil in 2006 but production has been delayed in part because of wrangling over the government’s plan to build a refinery. Alongside Tullow and Total, China’s CNOOC has a stake and won a licence in 2012.
“One oil company already has a licence. The other two oil companies, by the end of this year, we should have provided the production licences,” Energy Minister Irene Muloni told Reuters.
Tullow had no comment on the minister’s remarks.
Uganda also planned to hold a new exploration licensing round in the first quarter of next year with only 40 percent of its Albertine oil basin having been explored, Muloni said.
The landlocked east African country was planning to build an oil refinery and a pipeline in the next three years to use crude production available in 2018, she said. Ugandan output could reach 200,000 barrels per day (bpd).
A consortium led by Russia’s RT-Global Resources and another by South Korea’s SK Energy are competing as final bidders to develop the refinery, which will have an initial capacity of 30,000 bpd, Muloni said.
She said a winner would be announced by the end of the year.
The government had wanted to build a refinery with capacity to process 120,000 bpd. It later agreed to scale that back, and now aims to grow from the initial capacity to 60,000 bpd.
The lead investor is expected to take up a 60 percent stake, while the remainder will be split equally among Uganda and other interested east African countries.
Investor interest in Uganda’s hydrocarbons potential has been growing since it found commercial reserves. Recoverable reserves are estimated at 1.4 billion barrels. Government geologists put total reserves at 6.5 billion barrels.
A drop in oil prices of more than 25 percent since July to below $85 a barrel has rattled high-cost producers and raised concerns that projects around the world could be threatened.
Muloni said projects in Uganda would be profitable at around $80 a barrel but all its planned oil ventures would go ahead regardless of swings in prices, an opinion shared by many industry experts. [ID:nL5N0SQ1W1]
“It’s a pity the prices are nose-diving. It’s a concern for everyone but we will continue with our arrangements,” she said.
East Africa has been a focus of oil and gas exploration after substantial crude deposits were also found in Kenya, and vast gas reserves discovered in Tanzania and Mozambique.
By Joe Brock (Editing by Edmund Blair and Keiron Henderson)