FEATURE: Uganda hopes to lure more investors to nascent oil sector
Kampala (Platts)--25Feb2011/944 am EST/1444 GMT
Ugandan president Yoweri Museveni's victory in the February 18 election
is expected to boost investment in the country's nascent oil sector, Uganda's
minister of energy and minerals development told Platts Friday.
Hillary Onek also said that the government is expected to approve the
proposed joint venture between Tullow Oil and partners France's Total and
"We have been held up by a busy schedule, we are back in action and we
shall sign a deal soon to enable oil development," he said in an interview.
Tullow agreed last year to farm out 33% stakes in the Lake Albert oil blocks
to Total and CNOOC.
But while the deal has been conditionally approved by the government of
Uganda, it will not grant final approval until it has resolved a capital gains
tax dispute with Heritage.
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The government says it is owed $404 million in capital gains tax from the
Tullow's Ugandan spokesman Jimmy Kiberu said the company is confident the
deal will be signed off soon.
"There is a tangible progress in the process. We shall come out with a
statement soon," he said.
Tullow struck oil in 2006 and first production is now expected next year,
scaling up to a possible 150,000 b/d over the following three years.
Museveni has demanded that instead of exporting crude oil a refinery
should be built allowing Uganda to sell oil products to neighboring countries.
And, with CNOOC and Total set to buy into the Lake Albert acreage, the $2
billion refinery looks likely, which will enable Uganda to refine up to
200,000 b/d, analysts said.
Museveni has pledged that his government would ensure that revenues from
oil royalties would benefit all stakeholders in the country through investment
in infrastructure, human resources and scientific research and development.
But his main opponent Kizza Besigye dismisses the promises as
"laughable." "What a a joke. Is it only his family that will benefit from this
oil, as they been squandering other public resources", he said in a phone
interview. In 2009, the US government raised concerns over corruption
allegations in transactions in the country's oil sector after government
officials were implicated in bribery scams.
Museveni has also been accused of using his relatives and the military to
control oil and gas sectors in the country. Anti-corruption groups have voiced
concerns over the role of the army Special Forces, commanded by the
president's son, Lt. Col. Muhoozi Kainerugaba, and Saracen, a private security
firm owned by the president's brother, Lt. Gen. Salim Saleh, in guarding the
country's oil fields.
According to Onek, Uganda is planning to build a $173 million pipeline
from Hoima in the Lake Albert rift basin to the capital city of Kampala as it
prepares to start exploiting its oil reserves.
Another 1,300-km pipeline would run from Hoima to port Mombasa in Kenya
to transport refined fuel products for marketing once Uganda reaches
commercial production levels.
Uganda will introduce an oil law by June this year, to create a new legal
environment for the country's petroleum sector, which will also clear the way
for a new round of exploration licenses in late 2011 and lure more investors
to the landlocked country.
The country suspended licensing in 2007 to amend oil-sector regulations
and new legislation will come on stream soon, according to officials at the
ministry of energy and mineral development.
Analysts said there should be a good response from investors to a new
round, which would cover some of the five exploration blocks yet to be
licensed on the west side of the Albertine Rift.
The new legislation is expected to define how revenues will be shared
between central and local governments and to institute measures to limit
environmental damage from exploration.
--Mercy Matsiko, email@example.com