Uganda Reaches Deal With Oil Companies Over Refinery

KAMPALA, Uganda - The Ugandan government has reached an agreement with oil companies operating in its oil-rich Lake Albertine rift basin over the construction of a 30,000 barrels-a-day refinery, ending a nearly two-year deadlock that has largely been blamed for delaying the development of the country's oil fields, the Ugandan presidency said over the weekend.

The refinery agreement brings the two parties closer to a final deal on the basin-wide oil development plan, where companies are expected to invest more than $12 billion to develop the country's nascent oil sector.

A presidential spokeswoman said in a statement the refinery agreement was reached following a meeting on Saturday between President Yoweri Museveni and representatives of companies operating in the country--U.K.-based Tullow Oil PLC, France's Total SA and China's CNOOC Ltd. "The parties agreed to start with the refinery size of 30,000 barrels per day" the spokeswoman said, adding that Mr. Museveni noted that oil production in the country was long overdue because a lot of time has been wasted in negotiations and formulation of oil production documents. "We have wasted too much time. We are now with the issue of oil for seven years. We need to make our final decisions," Mr. Museveni was quoted as saying.

With an estimated 3.5 billion barrels of untapped oil, 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 oil companies over development plans, chief among them the size of the refinery. While the companies have been pushing for a pipeline to export crude on the open market, government has been insisting on the construction of a large refinery, with the capacity to refine as much as 180,000 barrels-a-day of crude into fuel products, initially for domestic consumption and then for regional export.

Last week, Mr. Museveni said that the two sides were close to agreeing an oil and gas extraction plan that is "optimal" for both government and oil companies. Following the meeting with oil companies, government also agreed to the construction of an export pipeline, the presidency said. In February, Total said that its project in Uganda would stall, unless government approved the construction of a pipeline. Negotiations over the final development plans for the oil basin are continuing and the two sides expect a final deal in the next few weeks, according to government officials. There was no immediate reaction from company officials.


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