Petroleum Africa
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Tuesday, September 18, 2012
Uganda has officially revised upwards its estimated oil reserves by 40% according to a government official. The East African country’s reserves have risen to 3.5 billion barrels after appraisal activity on two blocks revealed more resources, a senior government official told Reuters.
"We have been doing a lot of appraisal work over the last several months on the wells in blocks 1 and 2 and the reserves have been increasing and now we're able to confirm that we have about 3.5 billion barrels in place," Ernest Rubondo, the commissioner for the Petroleum Exploration and Production Department, was quoted in the report.
While the reserves may have risen, Uganda is slow to develop them and the companies operating on the prolific blocks in the Lake Albert Basin have faced one road block after another during the process of moving toward development.
The latest stall took place earlier this month when the government withheld its approval of the development plan that CNOOC, Total, and Tullow Oil submitted. Approval is being withheld until several issues are resolved; the main issue being that the companies partly fund the construction of a large refinery.
In a Wall Street Journal interview, Uganda Junior Energy and Minerals Minister Peter Lokeris said he would rather see initial production delayed by several years than implement an unsustainable development plan. "[Oil production] is a very big project, which we must handle carefully," said Lokeris. "Oil is a finite resource and it would benefit the Ugandan people better if it isn't rapidly exploited."
Tullow, Total, and Cnooc want to sell crude on the open market and are considering $5 billion of investment in pipelines to the East African coast, but Uganda wants its refinery. The government is insisting that the majority of production be refined inside the country, initially for domestic consumption and then for regional export. While the three partners are willing to help fund a small refinery, 20,000 bpd, the government is looking for something much larger and more expensive.
In previous statements Tullow has said it doesn't intend to invest in a refinery, citing its lack of downstream expertise and earlier this year COO Paul McDade said, "Our view, very strongly, is that an export pipeline is required to underpin the overall [basin] development and the government of Uganda themselves are looking at refinery options."
In an earlier interview, Mr. Lokeris said Total, Cnooc, and China's CNPC had expressed interest in building the refinery.
"Total understands the needs of the government of Uganda for a phased refinery to be built in Uganda, the capacities of which would address market demand," a Total spokeswoman said, without elaborating. According to past statements Total’s thinking would put a viable refinery at around 60,000 bpd, while the government’s thinking has a refinery pegged at a viability of at least 120,000 bpd.
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