Uganda to hold new licensing round in 2010

Uganda’s President Yoweri Museveni told a business forum his country is ready to undertake a new licensing round for oil blocks in the second half of this year.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 31 -- Uganda’s President Yoweri Museveni told a business forum his country is ready to undertake a new licensing round for oil blocks in the second half of this year.

"We [are] ready to resume fresh licensing, and we have many incentives for prospective investors, which include freedom on the repatriation of earnings," Museveni told the forum organized by the Uganda Chamber of Mines and Petroleum.

Museveni said Uganda plans to create a petroleum directorate at the Ministry of Energy and Minerals, a national oil company, and a petroleum fund to properly manage the sector.

"The petroleum fund will house oil revenues," Museveni said, explaining that Uganda will invest that revenue in renewable-energy projects, roads, railways, and industry.

Museveni suggested investors consider forming joint ventures with smaller exploration companies operating in the country, such as Tower Resources PLC, operator of Block 5; and Dominion Resources Ltd., owner of Block 4B.

The president’s remarks coincided with reports Uganda expects to produce some 200,000 b/d once the country's oil fields are developed, with the higher output due when the country reaches full-scale production.

At the same business forum, Tullow Oil PLC Chief Operating Officer Paul McDade said Uganda requires at least $5 billion to develop its downstream oil industry.

McDade said as much as $750 million has been invested in Uganda's oil exploration, and Tullow, along with potential partners Total SA and China National Offshore Oil Corp. (CNOOC), plan to invest more to develop the next phase of the oil sector.
"We are looking at concluding negotiations with [the] government regarding our partnerships to commence on the next development phase," said McDade.

Tullow needs government approval to acquire Heritage Oil's 50% stakes in two jointly owned exploration blocks. Tullow also has applied to the Ugandan government to sell stakes in the blocks to CNOOC and Total.

Tullow wants to lead the exploration and upstream development of the blocks, with the new partner or partners to concentrate on development of downstream infrastructure, including construction of a refinery in Uganda and an export pipeline to Kenya’s Port of Mombasa.

Earlier this month, a senior Ugandan energy official said the government expects soon to render its decision on both transactions. "Our expectation is that by April we will have finished our evaluation and that the government will give the go-ahead for the transactions to proceed," said Kabagambe Kaliisa, the energy ministry's permanent secretary (OGJ Online, Mar. 22, 2010).

Contact Eric Watkins at hippalus@yahoo.com.

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