Uganda Reaches Deal With Oil Companies Over Refinery

KAMPALA, Uganda - The Ugandan government has reached an agreement with oil companies operating in its oil-rich Lake Albertine rift basin over the construction of a 30,000 barrels-a-day refinery, ending a nearly two-year deadlock that has largely been blamed for delaying the development of the country's oil fields, the Ugandan presidency said over the weekend.

The refinery agreement brings the two parties closer to a final deal on the basin-wide oil development plan, where companies are expected to invest more than $12 billion to develop the country's nascent oil sector.

A presidential spokeswoman said in a statement the refinery agreement was reached following a meeting on Saturday between President Yoweri Museveni and representatives of companies operating in the country--U.K.-based Tullow Oil PLC, France's Total SA and China's CNOOC Ltd. "The parties agreed to start with the refinery size of 30,000 barrels per day" the spokeswoman said, adding that Mr. Museveni noted that oil production in the country was long overdue because a lot of time has been wasted in negotiations and formulation of oil production documents. "We have wasted too much time. We are now with the issue of oil for seven years. We need to make our final decisions," Mr. Museveni was quoted as saying.

With an estimated 3.5 billion barrels of untapped oil, Uganda is expected to join Nigeria, Angola and Sudan among sub-Saharan Africa's major crude producers. But the government had withheld consent for the development of the fields since last year, due to a spat with oil companies over development plans, chief among them the size of the refinery. While the companies have been pushing for a pipeline to export crude on the open market, government has been insisting on the construction of a large refinery, with the capacity to refine as much as 180,000 barrels-a-day of crude into fuel products, initially for domestic consumption and then for regional export.

Last week, Mr. Museveni said that the two sides were close to agreeing an oil and gas extraction plan that is "optimal" for both government and oil companies. Following the meeting with oil companies, government also agreed to the construction of an export pipeline, the presidency said. In February, Total said that its project in Uganda would stall, unless government approved the construction of a pipeline. Negotiations over the final development plans for the oil basin are continuing and the two sides expect a final deal in the next few weeks, according to government officials. There was no immediate reaction from company officials.

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Uganda: Close to Drilling Deal with International Oil Companies

KAMPALA, Uganda - Uganda is close to an agreement over oil drilling in the Lake Albertine Rift basin, its president said late on Tuesday.

"We are now about to conclude an oil-and-gas extraction plan that will be equitable to Uganda and the oil companies," a presidential spokeswoman quoted President Yoweri Museveni as saying.

"Uganda discovered oil in 2006 but has not been able to start the extraction process owing to a battle...with oil companies."

Uganda has an estimated 3.5 billion barrels in reserves which could see it join Nigeria, Angola and Sudan as a big, sub-Saharan producers.

The government has denied drilling licences unless oil companies agree to build a refinery and process most of the crude in Uganda. The companies are demanding a pipeline be built to the east African coast.

Oil projects worth as much as $12 billion are on hold since the impasse started more than a year ago.

Total S.A. said executives met Mr. Museveni last month but added that it won't start work on its concessions until the pipeline is approved.

Other companies ready to start production in Uganda are Tullow Oil PLC and Cnooc Ltd.

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Uganda Govt: Investment in Oil Exploration Hits $1.7B

KAMPALA, Uganda - Investment in oil exploration activities in Uganda's Lake Albertine Rift basin has reached at least $1.7 billion as oil companies continue efforts to determine the exact size of the East African nation's crude reserves, Uganda's energy and minerals ministry said Monday.

In a report, the ministry said that by the end of January 2013, a total of 88 oil exploration and appraisal wells had been drilled in the country, with 76 of them encountering oil. The discoveries represent an impressive success rate of 85% with less than 40% of the oil region explored so far, as Uganda steps up efforts to join the ranks of top oil producers such as Nigeria, Angola and Sudan in Sub-Saharan Africa.

"Cumulative investments made in petroleum exploration in the country since 1998 are estimated to be $1.7 billion... this is expected to increase as the country enters the development and subsequently the production and refining phase of the petroleum value chain," said Kalisa Kabagambe, permanent secretary at the energy and minerals ministry.

Increased discoveries have upgraded the country's crude reserve estimates to 3.5 billion barrels from 2.5 billion barrels last year. However, government and oil companies are still split over the oil development plan and refining options, which continue to push back the planned start of production.

More than a year since Uganda approved U.K.-based Tullow Oil PLC's long-delayed $2.9 billion agreement to split its oil licenses with Total SA and CNOOC Ltd., an oil development plan is yet to be agreed for the basin.

Tullow, Total and CNOOC want to sell crude on the open market and are considering $5 billion of investment in crude pipelines to the East African coast. But Uganda insists that most of the oil should be refined locally, initially for domestic consumption and then for regional export. The three companies are planning to invest at least $12 billion to develop the oil fields.

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Uganda Parliament Passes Second Oil Bill

KAMPALA, Uganda - The Ugandan parliament has passed the second oil bill, moving the East African nation closer to completing a new regulatory framework for its nascent oil sector, ahead of the planned development of oil fields along its western border.

The passing of the bill brings the country closer to reopening a new licensing round for the remaining acreage in the oil-rich Lake Albertine Rift basin.

The ruling National Resistance Movement party-dominated parliament voted late Thursday to pass the midstream bill, known as the Petroleum Refining, Conversion, Transmission and Midstream Storage Bill 2012, nearly three months after the upstream oil bill was passed, as the country continues to fast-track the enactment of new oil laws, following the discovery of around 3.5 billion barrels of crude reserves.

Parliamentary spokeswoman, Helen Kawesa, told Dow Jones Newswires Friday that the house will now consider the third and final oil revenue management bill to complete the new law chain.

"There's only one final bill pending, which will also be passed in the coming weeks," Ms. Kawesa said.

The midstream bill will regulate midstream operations, which include refining, transportation and storage of oil products, once the country starts production.

Unlike the previous upstream law, whose passing was delayed for several months as parliament bickered with the executive over the powers of the minister to license and revoke licenses, the midstream law quickly sailed through the house just after a few weeks of debate.

Ruling party lawmaker Stephen Birahwa said ruling party law makers endorsed the bill before its presentation to the plenary, speeding up its passage. Activists criticized the bill, however, saying once again it gives sweeping powers to the minister, which is a threat to good governance.

"It is going to be hard for Uganda to avoid the oil curse given the manner in which these bills have been passed," Winfred Ngabirwe, head of the pressure group Publish What You Want, told Dow Jones Newswires.

The bill grants the minister sole powers to award, suspend and initiate the development and implementation of policies concerning midstream operations among others.

Political observers say that Uganda's long-serving leader, Yoweri Museveni, is attempting to tighten his grip on the oil sector to fend off a growing challenge from an increasingly assertive parliament.

As the parliament continues to pass the laws, the government remains embroiled in a spat with Tullow Oil PLC, France's Total SA and China's Cnooc Ltd over the development plans and refining options for the country's crude.

The three companies are expected to invest up to $10 billion to develop the country's oil fields. While the companies are pushing for the building of a crude export pipeline, the government wants a larger refinery to refine the crude locally.

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Uganda to Auction 13 Oil Blocks in 2013

KAMPALA, Uganda - The Ugandan government is planning to auction at least 13 oil blocks in the Albertine Rift Basin this year as soon as the government lifts a ban on the licensing of new acreage, Uganda's junior energy and minerals minister said Wednesday.

Peter Lokeris said the planned auction will allow international oil companies to bid for exploration acreage in the basin, where existing companies have discovered deposits of as much as 3.5 billion barrels of crude oil.

The government has demarcated a total of 17 oil blocks in the region, Mr. Lokeris said. Four of the blocks were licensed before Uganda imposed a licensing ban on new acreage in 2007. The remaining blocks will be auctioned as soon as President Yoweri Museveni enacts a new law lifting the licensing ban.

"Competitive rounds for new acreage will be guided by the new petroleum...some of the acreage previously licensed to oil companies has been returned to government through relinquishment requirements and the expiry of licenses" Mr. Lokeris told Dow Jones Newswires on the sidelines of an oil conference in Kampala, the Ugandan capital.

The licensing round will be Uganda's first since it imposed the ban in 2007, which was put in place following the confirmation of commercial oil reserves. Oil exploration companies have since made a flurry of discoveries in the country, increasing the size of Uganda's oil reserves from around 300 million barrels in 2006 to 3.5 billion barrels to date.

Mr. Lokeris said oil exploration companies operating in the Lake Albertine Rift Graben have had a success rate of around 87%, finding oil in 76 oil wells out of the 87 wells drilled so far.

"Preparations for development of some of these discoveries is ongoing before production can commence...This is an exciting time for the country" he said.

Companies with licenses in the country so far include U.K.-based Tullow Oil PLC, France-based Total SA and China's Cnooc Ltd. The three companies are planning to invest around $10-12 billion to develop oil fields in four blocks as Uganda continues plans to join the ranks of African oil producers.

Companies such as Italy's Eni SpA, Russia's Lukoil Holdings, and India's Essar Oil Ltd. have expressed interest in acquiring oil licenses in the country. 

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