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 China's CNOOC.

"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 transaction.

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, newsdesk@platts.com