Development of Uganda's oil and gas resources has become problematical even before production can reach the surface. Indeed, the wrangling could be responsible for keeping reserves in the ground.
Tullow Oil PLC, which recently presented Uganda with development plans in partnership with China National Offshore Oil Co. and Total SA, is awaiting a final decision in order to complete the agreements.
Tullow's plans call for an integrated oil field development project, including construction of a refinery in Uganda and an oil export pipeline from Lake Albert basin to Kenya's Port of Mombasa.
Tullow hopes to establish an operating company along with CNOOC and Total, but Uganda first has to approve Tullow's takeover of the stakes of Heritage Oil PLC in two exploration blocks in Lake Albert basin.
Development plan
Kampala apparently wants to agree to the oil field development plan with Tullow and its proposed partners before approving the takeover of Heritage's assets.
Uganda said it planned to announce its decision by April, but that is yet to take place. The delay does not sit well with some parties.
In particular, Heritage has accused Kampala of delaying its approval of the proposed sale of the firm's 50% interests in the two exploration blocks to Tullow.
"There can be no doubt now that written consent has been withheld or delayed," said McCathy Terrault, the law firm representing Heritage. It said the question for Heritage is whether "such consent has been withheld or delayed unreasonably."
Analyst IHS Global Insight said Uganda appears to be in "no rush" and that officials have indicated that they are keen to assess the plan very carefully in order to make "an informed, forward-looking decision."
But the analyst also noted that "such an approach of continued delays nonetheless carries a degree of risk of souring the relationship with the companies involved."
Enter the Russians
Meanwhile, to add another element to the mix, a contract is being prepared to deliver six Russian-built multifunction Su-30MK2 fighter jets to Uganda.
"Specialists of Rosoboronexport and the Sukhoi Co. have recently held another round of negotiations in Uganda on the supply to this African country of six Su-30MK2 jets," said one informant.
"All technical issues on the preparation of the contract have already been agreed on," the source said. "What is still left to do is to agree on a mechanism for payments for the aircraft."
As Uganda is said to be a very poor country, without enough cash to pay the $300 million cost of the jets upfront, talks are under way for Lukoil to take part in the development of country's oil assets.
"Should a contract be signed, the aircraft can be delivered to Uganda in 2011-12," the source said.
What's that old story about not counting your chickens until their eggs have hatched? Someone in Uganda should read it.
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