Uganda eyes 120,000 bpd pipeline to export crude


KAMPALA, Uganda -- The Ugandan government is considering approving construction of a 120,000 bpd pipeline to export crude oil via the East African coast once crude drilling starts in the country's oil-rich Lake Albertine rift basin, the energy and minerals ministry said Tuesday.

The country is planning to build a 30,000 bpd refinery to produce refined fuel products for the local market, allowing the pipeline to transport additional crude to export markets through neighboring Kenya, according to Kalisa Kabagambe, the ministry's permanent secretary.

After months of back-and-forth negotiations, Uganda is closing in on a deal with UK-based Tullow Oil and its joint venture partners, Total and China's Cnooc over the oil development plans and refining options for its vast crude reserves, which could unlock investments worth more than $12 billion in the country.

"One of the key considerations in determining these capacities is the need to ensure efficient management of the resource by producing at levels that enable the country to maintain the integrity of the petroleum reservoirs," Mr. Kabagambe said.

Uganda has at least 3.5 billion bbl of crude reserves along its western border with Congo and estimates daily crude output to reach up to 200,000 bbl at peak production. The country will upgrade its refinery to double its capacity once it attains peak crude output, Mr. Kabagambe said.

Earlier this month, government agreed with oil companies to start with a 30,000 bpd refinery, much lower than its earlier demand of a 180,000 bpd refinery, breaking a nearly two-year deadlock that has been blamed for delaying the development of the country's oil fields.

In February, Total warned that its Uganda project would stall, unless a crude pipeline was approved.

Company officials couldn't comment immediately.

After agreeing the refinery size, the two sides have to agree on the capacity of the pipeline as well as production levels, before signing a memorandum of understanding, to pave way for the development of the country's nascent oil sector. A deal on outstanding issues is close, Mr. Kabagambe said.

Dow Jones Newswires

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