Gov’t, Oil Firms Complete MoU Talks

An Oil Rig in western Uganda

An Oil Rig in western Uganda
An Oil Rig in western Uganda

The government, Tullow Oil, CNOOC and Total have negotiated and agreed all the elements of a commercial framework Memorandum of Understanding that consists of a value chain in which the upstream production feeds into an optimally-sized refinery, a crude export pipeline from Hoima to Lamu in Kenya, and a crude power plant for electricity generation, the Minister of Energy and Mineral Development Irene Muloni, said on Thursday.

“Negotiations about this MoU are now fully complete and we anticipate its signing very soon. This is a significant milestone since the market framework is critical for the commitment of project financing,” she said at the farewell party of outgoing president and director of Tullow Uganda Operations Pty Limited Dr Elly Karuhanga at the Sheraton Kampala Hotel.

Speaking at the ceremony, Graham Martin, the Executive Director and Company Secretary Tullow Oil Plc said, Uganda is one of the countries at the core of Tullow Oil’s exploration and production business strategy. “Our company’s business strategy has Africa at its core and we are already Africa’s leading independent oil exploration and Production Company. Tullow Uganda is part of our East Africa strategy. We expect production in Uganda to average 220,000 barrels a day, drawing from recoverable reserves of 1.7 billion barrels,” Martin told guests. Uganda has discovered 3.2 billion barrels of oil, with 1.7 billion barrels estimated as recoverable.

“With a shared East African pipeline already agreed by Presidents; Yoweri Museveni and Uhuru Kenyatta, Uganda forms a highly valuable asset in our long term East African exploration and production plans.” In Kenya and Ethiopia, Tullow’s exploration efforts have already yielded significant discoveries – further discoveries announced in Kenya last week.

As an example of what can be achieved in Africa, Martin cited Ghana as a success story in Africa. “Tullow has taken the country’s oil potential from exploration in 2006, through the appraisal and development stages to the production stage and we have delivered over US$5 billion to the Ghanaian taxpayer. We have a solid track record as a partner of Africa’s development. “We can do the same here,” he noted.

In his remarks, Jimmy Mugerwa, the general manager, Tullow Uganda said, the company has invested $2.8 billion (Shs7 trillion) in exploration for oil and the acquisition of Heritage Oil’s interests in Uganda since 2004, when it started its operations.

“The Ugandan taxpayer can expect to earn approximately US$50 billion from this project over the 20-year production period. The project cost is expected to total between $ 15-22 billion, depending on the outcome of value engineering efforts currently underway to bring down the technical costs. As a serious partner of Uganda’s development, Tullow and its partner CNOOC and Total are committed to develop this Lake Albert Basin,” Mugerwa said.

The minister commended Tullow for its extraordinary exploration and appraisal processes which have put Uganda on the map of countries that will be producing oil in the next few years. She also applauded Dr Karuhanga for playing an important role in bridging the relationship between Tullow Plc and the Government of Uganda.

“Tullow has achieved an exploration success rate of 84% at the 69 wells drilled so far, against a global average of 22% for the oil industry. I would therefore like to commend you for the technical expertise and success in exploration,” Muloni added.

Commenting on Karuhanga’s term as President, Mugerwa said, he has been an important resource to Tullow Uganda given his expert lobbying, networking and advisory skills. “He has greatly contributed to strengthening our business relations with our major stakeholders, the government, our partners and key business partners. This has created support to our business and achievement of our goals.”
Dr Karuhanga has served as president and Director of Tullow Uganda Operations Pty Limited and has been a Senior Advisor – Africa, for Tullow Oil between 2005 and December 31st 2013 when he retired. He is also the Chairman of the Uganda Chamber of Mines and Petroleum, British America Tobacco Uganda, DFCU Limited and Nile Breweries Limited.

One of his remarkable contributions was toward the successful sale of 66.6% of Tullow’s interests in Uganda to CNOOC and Total for $2.9 billion in 2012. The partnership brought additional capital investment and skills to Uganda’s oil and gas sector. “This achievement was a giant leap forward for the Uganda business,” he said.

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