Tullow to begin Ugandan oil production this year
Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Feb. 2 -- Tullow Oil PLC plans to begin oil production from its Uganda fields this year, starting at 500-1,000 b/d and rising to 10,000 b/d next year before reaching 150,000 b/d in 2015.
Initial production at midyear will not be “economically significant, but it is a great step forward for Ugandans to know that their oil is being used for industrial use,” said Tullow Chief Operations Officer Paul McDade.
“We would like to produce oil on a test basis to see how the oil wells behave and how the crude can be transported by truck since it is waxy. We will have to heat the oil to keep it flowing,” said McDade. The oil will be produced from Block 2, which is 100% owned by Tullow.
McDade said Tullow plans to invest $300-400 million in the initial phase, rising to $5 billion to reach the 150,000 b/d level. He said initial production will be used for local industry and power generation.
In addition to Block 2, Tullow has a 50% stake in Block 1 and in Block 3A. Tullow Uganda Ltd. recently entered into an agreement with Heritage Oil & Gas Ltd. and Heritage Oil PLC to purchase their entire interest in Blocks 1 and 3A (OGJ Online, Jan. 28, 2010)
Anticipating its takeover of the Heritage blocks, Tullow is considering farm outs. According to McDade, the two companies that Tullow prefers to work with are China National Offshore Oil Corp. and Total SA.
"The Chinese are best in building refineries, and they move fast. CNOOC has just built a big refinery in China [that] can refine the same quality of oil as in Uganda. They built it in a period of 2 years."
Tullow recently announced plans to sell more than 80 million shares, equivalent to 10% of the outstanding equity in the company, to accelerate plans to develop huge oil discoveries in the Lake Albert Rift basin. Tullow Chief Financial Officer Ian Springett said the cash would also be used to help to buy out Heritage Oil's stake.
Contact Eric Watkins at [email protected].