Mon | Sep 25, 2017

Uganda hopes for oil production by 2018 after pipeline deal

Published:Wednesday | April 27, 2016 | 4:02 AM

Uganda's hopes to produce crude oil by 2018 have been boosted by an agreement to build a pipeline to Tanzania's Tanga port, a government official said Tuesday.

The agreement with Tanzania comes after months of uncertainty over which route the pipeline would take, said Bukenya Matovu, a spokesman for Uganda's energy ministry.

The decision to build a pipeline was reached over the weekend at a meeting of regional leaders, including the president of Kenya, whose port of Lamu had been another export option for landlocked Uganda. Kenya said it will proceed with a separate pipeline linking its oil deposits in the Lokichar basin to Lamu.

"Production in Uganda starts by probably 2018, but even that would be optimistic," Matovu said, citing some challenges that remain. The government is still compensating families that would lose land to production facilities, and a lot of the necessary infrastructure including holding facilities and pumping stations are not yet in place, he said.

The French oil company Total, which has investments in Uganda, said the pipeline decision "is a major milestone towards the development and production of Ugandan resources".

Uganda is estimated to have oil reserves of more than six billion barrels in the Lake Albert basin along its Congo border.

In 2014, the Ugandan government signed an agreement with Total, Britain's Tullow Oil, and the state-owned China National Offshore Oil Corporation laying out broad strategies for production.

Under that agreement, some of the crude will be used to generate power locally, while the rest will be refined for domestic consumption or exported as crude through the Indian Ocean. Uganda's government plans to build a refinery with a capacity of 60,000 barrels per day, while its partners will build the oil pipeline.