Uganda signs oil development pact with Tullow, Total, CNOOC

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The Ugandan government has signed a deal with Tullow Oil, Total and Cnooc, on an oil refinery and pipeline, which may clear the way for the start of crude output.

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The deal details plans for the initial use of oil flows in power generation before construction of a refinery that may be ready in 2017 and an export pipeline, Energy Minister Irene Muloni told reporters today in the capital, Kampala.

The memorandum of understanding requires the three oil companies to “support” plans to develop a refinery in the country, while obligating the government to help examine construction of a pipeline from the landlocked nation in cooperation with neighboring nations, she said.

“The conclusion of the MOU is a significant step as it gives a road map for the commercialization of petroleum resources discovered in the country,” said Muloni.

Commercial output of oil, which was first discovered in Uganda in 2006, is expected to start next year or 2016 after a series of delays including wrangling over the viability of a local refinery versus construction of an export pipeline.

Uganda has an estimated 3.5 Bbbl, according to the Energy Ministry, with Tullow, Total and Cnooc planning to tap the country’s Lake Albert fields. Uganda has sub-Saharan Africa’s biggest oil reserves after Nigeria, Angola and South Sudan, according to the International Monetary Fund.

Uganda discovered oil in 2006 but the transition to development has been delayed by years of disputes over taxes and differences between the companies, as well as the government’s insistence on refining the oil before exporting.

But in April last year, the government agreed with the companies to build a smaller refinery than it had initially wanted to supply local markets, and a pipeline to neighboring Kenya.

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