Export pipeline routes considered for Uganda

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Dec. 15 -- Uganda’s government, concerned by delays over a proposed oil export pipeline through neighboring Kenya, is considering construction of an oil pipeline to Tanzania’s Port of Dar es Salaam.

However, Ben Twado, Uganda's commissioner for petroleum supplies, said it is still too early to discuss the matter in detail.

The Ugandan and Kenyan governments have been negotiating extending and upgrading the pipeline that transports oil northward in Kenya from the Port of Mombassa to Eldoret. Uganda wants to reverse the flow of the Mombassa-Eldoret line so crude can be transported southward, but Kenya is said to oppose redesigning the pipeline.

Tamoil East Africa, a unit of the Libyan state-owned oil company Tamoil Holdings, was contracted last year to extend the pipeline 351 km from Eldoret to Kampala. However, work on the proposed extension—due to begin in April and last 15 months—has not yet started.

BMI analysts said Tullow Oil PLC and Heritage Oil PLC favor construction of a new oil export pipeline to Mombasa and have discussed possible funding with financial investors.

Eni SPA, which may acquire a share in the licenses from Heritage Oil, proposed constructing a 100,000 b/d refinery in Uganda that would be connected to a new export pipeline to Mombasa. “This would allow the government to maximize its revenues by keeping all of the refining operations domestically, while letting producers sell most of Lake Albert's oil internationally at market prices,” BMI said.

Eni's purchase of a 50% interest in Uganda’s Blocks 1 and 3A from Heritage Oil for $1.5 billion is expected to be completed in the first quarter. Eni said the blocks in the Lake Albert basin have resources for more than 1 billion boe and that 700 million bbl have already been discovered (OGJ Online, Nov. 24, 2009).

“We're hoping that within 2 years they should be able to start production,” Ugnada’s energy minister Hilary Onek told Reuters. Uganda wants to build a refinery with 100,000-200,000 b/d capacity to process the crude.

“Our policy is to refine domestically all oil produced in Uganda. However, depending really on the production, some excess of crude oil may be exported,” Onek said.

Contact Eric Watkins at hippalus@yahoo.com.

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