May 9, 2013

Gov’t, Oil Companies Finally Agree On Refinery and Pipeline

Fred Kaliisa Kabagambe the Permanenet Secretary in the Ministry of Energy
Fred Kaliisa Kabagambe the Permanenet Secretary in the Ministry of Energy

Government and the oil companies operating in the country have finally agreed to set up an export pipeline and a refinery, ending a long battle on how to develop the new oil industry.

Tullow Oil, the parent company of Tullow Uganda, in an Interim Management Statement issued on Wednesday said that a common understanding had been reached on the key factors regarding the development of the Albertine basin where oil has been found in the country. It said the agreement followed engagement between the companies and the Government of Uganda.

The statement cited the agreement on a basin commercialisation plan which will include an export pipeline and a refinery sized to meet the local market demand among the developments. There is yet no clear information on the cost and duration of an export pipeline, however recent reports showed the refinery would cost about 2 billion dollars and would be in place by 2016.

Tullow added that a Memorandum of Understanding (MOU), to document the agreement was being prepared and would form the basis of the development work plan for the Albertine basin where the oil is located. It is expected that the MOU would include a number of Field Development Plans and Production Licence Applications, which could eventually pave way for oil production activities to begin.

There has been intense debate and negotiations between government and the oil companies regarding issues such as the Field Development Plans, which involves details of extracting oil from the ground and restoring the extraction areas. Other controversial issues that extended the debates and negotiations included establishment of a refinery and a pipeline. While government insisted on a refinery, the oil companies maintained they needed to build a pipeline.

There have been suggestions that an oil export pipeline could be built along the existing railway lines to Mombasa or Dar es Salaam. Another route through Turkana to the Port of Lamu has also recently been cited.

The ministry of Energy officials were yet locked up in a meeting at the ministry headquarters by afternoon to provide clarity on how the latest developments would progress. However, Kabagambe Kaliisa, the Permanent Secretary in the ministry of Energy and Mineral Development, told news editors in Kampala last month that government would build a refinery with the capacity to handle 60,000 barrels of oil per day. He also said that the oil companies could go on and build an export pipeline adding that government would only regulate the activity.

Tullow also said in the statement that they had completed exploration in West Nile after unsuccessful attempts on Ondyek-1 well. Tullow is one of the three oil companies operating in Uganda presently, each with a 33.3 percent stake in each of the oil fields after the London listed company sold its majority shares to the companies: China National Offshore Oil Corporation and Total E and P are the other companies.

The agreement on the establishment of a refinery and an export pipeline would constitute another key step in the development of the oil and gas sector in Uganda after the recent legislations to were enacted to regulate the industry.

Some of the Residents who came from Kabaale at Speke Hotel Today
Some of the Residents who came from Kabaale at Speke Hotel Today

mean while Residents affected by the Project will be petitioning the speaker over what they say is the unfair way in which they are being evicted from their land.

2 thoughts on “Gov’t, Oil Companies Finally Agree On Refinery and Pipeline

  1. This is good news. Refining oil in Uganda shall go a long way in boosting the tax base, that would trigger economic growth. Our 2040- vision is bright. Government should only control corruption if we are to move faster.

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