Tullow, Uganda Shs31 Trillion Oil Deal Drags On


recipe geneva;”>“Discussions with the Government are ongoing to finalise a Memorandum of Understanding (MoU) aimed at agreeing on a basin commercialization plan, web ” the firm said in its monthly trading statement and operational update.

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“The MoU will detail the integrated development of the upstream, an export pipeline and a refinery sized to meet market demand.”

Tullow Chief Executive Aidan Heavey said Wednesday: “In Uganda, we have made substantial progress with our partners and the Government and expect to sign a Memorandum of Understanding which will outline the key principles for the development of the Lake Albert Basin development.”

The plan involves a 30,000 barrels a day refinery and an export pipeline to carry crude oil from the Lake Albert Rift basin oil fields.

Tullow is working closely with partners Total SA (TOT) and China’s CNOOC Ltd. (CEO) to extract oil from western Uganda.

Exploration and appraisal activities across the basin this year have included two exploration wells, one appraisal well, seven flow tests and seismic acquisition.

Since early May, three appraisal wells have been drilled and two flow tests have been successfully carried out across the Lake Albert Basin.

Heavey in June said while resources continue to be enhanced through this exploratory appraisal, the Ondyek-1 well to the West of Nile was unsuccessful and exploration in this area is now complete.

A Memorandum of Understanding, to document the agreement between Uganda and Tullow, is now being prepared and will form the basis of the integrated development work plan for the basin.

It is expected to include a number of Field Development Plans and Production Licence Applications that will be submitted during the course of the year.”

Museveni Intervention

President Yoweri Museveni in April directed oil producing companies and the Ministry of Energy and Mineral Resources officials to finalize and agree on the development of the oil refinery and pipeline concurrently and sign a memorandum of Understanding to the start of oil production.

He noted that the negotiations on the MOU on building the refinery and pipe line have dragged on for a long time.

He said what the government wants is to produce enough oil to meet the demand in the market and to ensure that an oil pipe line operates at the optimal.

The two negotiating parties had disagreed on some of the clauses in the MOU of the development of the refinery and pipe line.

Museveni said oil production in Uganda is overdue and that a lot of time has been wasted in formulating the oil production documents like the Production Sharing Agreement and Memorandum of Understanding among others, between the Government of Uganda and the Oil Companies in the last seven years since oil in Uganda was found.

“We have wasted too much time. We are now with the issue of oil for seven years. We need to make our final decisions”, he said.

The President was speaking to a delegation from Total and China’s Cnooc Ltd in a meeting with the officials from the Ministry of Energy and Mineral Resources at State House in Entebbe.

The meeting was attended by the Minister for Energy and Mineral Development Eng. Irene Muloni while that of the oil companies was led by Loic Laurandel, general manager Total E&P Uganda.

The Oil Companies pressed on for the contraction of refinery size of 30,000 barrels of oil per day while the Ministry of Energy officials pressed for unconditional expansion of the refinery size of 30,000 to 60,000 barrels of oil per day when the demand increases in future.

The two parties however agreed to start with the refinery size of 30,000 barrels per day.

Museveni said that the government of Uganda needs the money from the oil to develop infrastructure and provide cheaper energy for the people to use for economic development.

He said that Uganda government targets refinery size of 60,000 barrels per day because of the increasing demand in the market which is likely to over grow the present consumption rate of 30,000 barrels per day.

Loic Laurandel General Manager Total said that the agreement signed should be that which will attract refinery investors and the financiers of the project.

The meeting was also attended by Maria Kiwanuka Minister for Finance, the Attorney General Peter Nyombi and the Solicitor General.

Uganda spends at least sh2 trillion on the importation of petroleum products annually.

Lack of a refinery means Ugandans will have to pay an additional $17 per barrel of crude oil exported through the heated pipeline and miss the oil production by-products, petro-chemical industry and developing the technical capacity to manage the oil resources.

Gov’t views

Museveni told Parliament in June that when more reserves are discovered, provided the internal market so dictates, the refinery will be expanded.

“Although we did not, initially, have interest in a pipeline, our commercial Partners, the Oil Companies seem to have a big interest in it as do their financiers we are told. Their position seems to be based on their failure to understand the new dynamics in Africa and what was, previously, called the Third World,” argued Museveni.

The President further said you cannot have a country with 10 million of its children in schools continuing to be a Third World country for long.

“On account of their (oil companies) fundamental misunderstanding, they under estimate the consumption level of the Ugandans and their purchasing power. That is why they are desperate for a pipeline to insure their investments. They fear that they may invest and, then, nobody buys the finished oil products in Uganda,” he observed.

“Hence, the desperation for a pipeline. I have agreed to this re-packaging because, whatever the packaging, much of the money is ours – whether it goes through the refinery or through the pipeline. Of course, with this pipeline, the coastal countries deduct some money for transit and there is the fee for the use of the pipeline. Nevertheless, paralysis is also costly. We need the money to build our infrastructure and to do other important things.”

Museveni also recommended that MPs support the addition of the pipeline provided the refinery gets the first call on the crude oil if the internal and the regional market justify it, adding, a number of groups have shown interest in building and financing the refinery.


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