By NICHOLAS BARIYO
KAMPALA -- The Ugandan government and three international
oil companies have agreed to build an export pipeline and
refinery in the East African country, ending a deadlock that
has delayed the development of large oil discoveries on its
western border for almost two years, said the office of
The refinery will have the capacity to
process 30,000 bpd of oil, much less than the government had
The agreement resolves one of the most contentious elements
of a protracted debate over how Uganda should develop its
newfound oil reserves. It brings the government and the trio of
Tullow Oil, Total and Cnooc a step closer to a final decision
on an investment that could total more than $12 billion and
lead to the first significant oil exports from the east coast
of sub-Saharan Africa.
Ugandan President Yoweri Museveni said the agreement was
long overdue. "We have wasted too much time. We are now with
the issue of oil for seven years. We need to make our final
decisions," he was quoted as saying in a statement.
Negotiations over the country's final oil development plans
are continuing, and the two sides expect a final deal to be
reached in the next few weeks, said government officials who
didn't wish to be named. The parties are yet to agree on the
oil production targets for the project.
"We are hopeful that...2013 will mark the agreement and
sign-off of the development and commercialization scheme with
the government of Uganda," which would then allow the project to go ahead, the three
companies said in a joint statement.
With an estimated 3.5 billion bbl of untapped oil reserves,
Uganda is expected to join Nigeria, Angola and Sudan among
sub-Saharan Africa's major crude producers. But the government
had withheld consent for the development of the fields since
last year due to a spat with the companies, chiefly the size of
The government had pushed for the construction of a refinery with the
capacity to process as much as 180,000 bpd of oil, initially
for domestic consumption and then for regional export. But the
oil companies argued that a refinery of this size would be
prohibitively expensive to construct and would produce more
fuel than the local market could consume.
During several meetings with Ugandan authorities in recent
weeks, the three companies said they argued that a refinery
with a capacity to meet the local market demand, combined with
an export crude pipeline, would "achieve the maximum value of
the Ugandan oil."
The agreement to build a refinery with a capacity of just
30,000 bpd was reached following a meeting on Saturday between
Mr. Museveni and representatives of the oil companies, a
presidential spokeswoman said.
It follows a warning from Total in February that failure to
include an export pipeline in the plan would stall the Ugandan
The deal is "a very positive development as it clearly shows
a will in Uganda to get the development going," said a person
close to one of the oil companies who didn't wish to be named.
The person also said the agreement was verbal and hadn't yet
Discussions over the level of oil production that Uganda
should target are continuing. The government has said it wants
a gradual production increase to avoid the rapid depletion of
the reserves, but companies are pushing for faster growth, to
as much as 200,000 to 230,000 bpd by 2020. Three potential
export pipeline routes are also being considered.
Dow Jones Newswires