Tullow: Govt, Oil Companies Making Progress On Oil Deals

Government and the oil companies in the country have made substantial progress in discussions expected to end in the signing of agreements ahead of anticipated oil production, according to a Tullow oil official.

On Wednesday, Aidan Heavey, Tullow Oil’s Chief Executive Officer, said that they have made substantial progress and expected to sign a Memorandum of Understanding with government that would outline the key principles for the development of the Lake Albert Basin.

Tullow operates in Uganda alongside Total and China National Offshore Oil Corporation (CNOOC), the other licensed oil exploration companies. Each of the companies owns 33.3 percent of the shares in the four exploration areas in the country following a transaction in which Tullow sold 66.6 percent of its shares to the two companies.

Heavy added that Tullow has made more discovery of oil at Etuko-1 in Kenya and significantly upgraded their resource estimates for the South Lokichar Basin following successful flow testing of Ngamia and Twiga-South.

He however did not indicate when they expect to sign the Memorandum of Understanding (MOU) with the Ugandan government, an agreement that is expected to detail the integrated development of the upstream, an export pipeline and a refinery.

The anticipated MOU would become the second that government would be signing with Tullow Oil. On February 3, 2012, government signed Production Sharing Agreements with Tullow Uganda Limited. It also entered into a Memorandum of Understanding with government regarding the development of the petroleum resources discovered in Exploration Areas 1, 2 and 3A.

At the time, Tullow was also granted an oil production license for the Kingfisher Field, which has since come under the operatorship of CNOOC following a farm-down with Tullow. The agreement specified that a signature bonus of 500,000 US dollars would be paid to government upon signing the agreement.

The licensed oil companies operating in Uganda are expected to complete appraisal work and submit applications for production licenses and field development plans for the discoveries in the Albertine Graben.

Tullow’s proposal covers the field development plans for the discoveries at Kasamene, Waraga, Ngege, Nsoga, Kigogole, Wahrindi and Ngara in Exploration Area 2. Total’s is expected to include field development plans for its discoveries in Exploration Area 1 and 1A in the Packwach basin that include Jobi, Rii, Mpyo, Ngiri and Gunya.

Kabagambe Kaliisa, the Permanent Secretary in the Ministry of Energy and Mineral Development, recently said that government was in discussions with the oil companies on the proposed Field Development Plans for Mputa, Nzizi and the Kingfisher fields before issuance of production licences. He however did not specify how long the discussion would last.

Last month, President Yoweri Museveni said during the State of the Nation Address that the long standing disagreement between government and the oil companies over the establishment of an oil pipeline and a refinery has been resolved.

Museveni explained that the decision to relax the government stance against the pipeline was due to the interest in a pipeline by the oil companies and some of their financiers who insisted on having the infrastructure to transport the crude to the coast. He added that there were many groups interested in building and financing the refinery.

Museveni emphasized that the oil and gas discovered in the country would boost the electricity generation capacity and promote the country’s growth by about 9 percent. Uganda announced the discovery of commercially viable oil in 2006 and the capacity has since increased to about 3.5 billion barrels, according to information by the Ministry of Energy.