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Uganda gov’t and Oil Companies agree to disagree on oil processing

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Uganda gov’t and Oil Companies agree to disagree on oil processing

Remarkable; Uganda’s Oil minister Muloni exchanges agreement with Tullow MD

The Memorandum of Understanding (MoU) signed between the Government of Uganda and Oil companies has sharpened disagreements between the two parties over the exploitation and development of oil resources in the country.

Last week, Total E&P Uganda B.V.(TOTAL), troche Tullow Uganda Operations Pty Limited (TUOPL) and Tullow Uganda Limited (TUL) in the presence of President Museveni at State House Entebbe.

However, a cursory look at the agreements reveals that disagreements over how to exploit the oil reserves have persisted with the government preferring to build a refinery while the oil companies insist on building a crude oil export pipeline.

A statement issued by the Ministry of Energy notes that oil companies committed to supporting the government in its efforts to develop the refinery including public endorsement of the project. It also requires Government to provide support to the oil companies in acquiring approvals for studies and surveys for an export pipeline and to initiate discussions with neighbouring countries in relation to cross border frameworks for the pipeline.

The government of Uganda has long insisted on building a refinery that can produce up to 60,000 Barrels of oil per Day (BPD) as its priority arguing that it would yield higher revenues but also support the development of other petrol-chemical industries locally and as well as supply oil needs to the local transport industry.

On the other hand however, oil companies have argued that a refinery would be too expensive and have opted for a crude oil export pipeline or any other viable options.

The signed MOUs however clearly states that the oil companies would develop the pipeline on their own cost after sharing of the oil at source.

The MOU states that refinery shall have the right of first call on production volumes from the licensed areas.

“In the short term and prior to the refinery coming on stream, the companies will supply Crude Oil from the Contract Areas to be used for power generation. Excess associated and non – associated gas will be used for power generation or any other viable option,” notes the MOU.

President Yoweri Museveni congratulated the Ministry of Energy and Mineral resources and the Oil Companies upon their successful signing of the Memorandum of Understanding (MOU) on the use of the crude Oil.

The commercialisation plan is based on the current discovered recoverable reserves in the country estimated at a range of 1.2 to 1.7 billion barrels of crude oil. The MoU also provides for the expansion of the refinery beyond 60,000 barrels per day in the event that additional resources are confirmed in the licensed areas.

Minister Muloni said: “My Ministry is taking forward the development of Uganda’s refinery and is now acquiring 29 Square kilometres of land in Hoima district for the project through implementation of a Resettlement Action Plan.

Muloni added that six firms and/or consortia have been short-listed to submit proposals for the development of the refinery and among the six, one will be selected as Lead Investor/Operator for the development, implementation and operation of the 60,000 BPD refinery and related downstream infrastructure.

She said: “The refinery is expected to be in place by 2018 to enable commercial production of our country’s petroleum resources.”

Mulono hailed the signing of the MoU as a significant step towards the production of Uganda’s discovered oil and gas resources. Government recently issued a production licence over the Kingfisher Field operated by CNOOC. CNOOC has now commenced the development of this field which is expected to take a period of four years before production can commence.

The added that her ministry is reviewing applications for production licenses over eight discoveries in Exploration area 2 operated by Tullow and another application has been submitted by Total for a Field in Exploration Area 1.

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