Uganda Needs $8B Oil Investment in Next Decade
KAMPALA, Uganda (Dow Jones), Feb. 17, 2010
Uganda needs investments worth $8 billion in the next 10 years to develop its oil and gas industry, the ministry of energy and minerals development said Wednesday.
The Ugandan government is vetting development proposals submitted by U.K.-based Tullow Oil PLC (TLW.LN) and its prospective partners France-based Total SA (TOT) and China National Offshore Oil Corp., or Cnooc Ltd. (CEO), said Kalisa Kabagambe, permanent secretary of the ministry of energy and minerals, in a presentation to the parliamentary committee on natural resources.
"The type of companies required to carry these activities forward need to have the necessary risk capital and access to project finance," Kabagambe said. "Since the investment required in the short to long term (2010-2020) is in the order of $8 billion, a company with a market capitalization of at least three times the size of the required investment would be a credible party."
Uganda's discovered oil reserves are now estimated at 2 billion barrels. The roughly 700 million recoverable barrels from those reserves are currently worth around $50 billion, Kabagambe said.
Field appraisals, development, and oil processing and transportation equipment are expected to cost at least $1.5 billion in the short term; $2 billion is required for a refinery; and $300 million will be needed for a power plant, Kabagambe said.
In the long term, the country will need additional appraisal and development activities on Uganda's Lake Albert and expanded storage and pipeline infrastructure -- especially to handle exports. That investment will cost around $4 billion, Kabagambe said.
People familiar with the situation have said the government is taking its time to make a thorough study of the various development proposals presented by the companies before making a decision.
Tullow is seeking to complete a takeover valued at up to $1.5 billion of Heritage Oil PLC's (HOIL.LN) interests in two Ugandan blocks. Tullow said in January it would seek to bring in either Total or Cnooc as a partner in its Ugandan oil interests.
Before Tullow Oil's purchase of Heritage's oil interests is approved, Tullow will have to introduce Total and Cnooc when they make their own presentations to government, Kabagambe said.
The government wants Total and Cnooc to enter the country's oil and gas sector jointly and to partner with Tullow Oil in the three oil blocks where commercial oil reserves have so far been confirmed.
Last month, Tullow Chief Executive Aidan Heavey said both Total and Cnooc would be great partners, but Tullow would probably recommend just one as its Uganda partner because "these are major companies and they need a material stake."
Tullow declined to comment. Total and Cnooc did not immediately respond to emailed request for comment.
Copyright (c) 2010 Dow Jones & Company, Inc.
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