Tullow far from earning petrodollars for Uganda and EA
Uganda and East Africa may have to wait a little longer for petro-dollars from Uganda’s extensive oil fields as it emerges that major oil production is unlikely to commence until at least 2014/15.
Even then, the plan remains largely fluid as major elements of the programme design are yet to be completed and agreed on with Ugandan authorities.
Current estimates put the potential in Uganda’s Albertine Rift between 1.5 and two billion barrels of oil and just over 800 million barrels of these have been confirmed.
Two operators, Tullow and Heritage Oil, that have been conducting a joint exploration programme in the area, are the custodians of these finds.
Although Tullow had variously mentioned 2010 as a possible date for first oil production, it turns out this will be very limited in scope and targets power production from gas finds in the area and a topping plant for heavy fuel oil.
In private conversations, observers have cast doubt on the viability of Tullow’s pronouncements, pointing out that the company has not announced any practical steps geared towards commercial extraction of Uganda’s crude.
Even if the oil were brought to the surface, given the remote location of the oil fields, it would also require substantial investment in infrastructure, none of which is likely to be in place in the next three to five years.
“Tullow has made it clear that it envisages small-scale first oil production in 2010, first gas production and power and first commercial oil production by late 2011 and major production 2014 and 2015.
These plans have not changed and we remain on course to achieve these milestones. However, there is a great deal of infrastructure development and institutional capacity understanding and work to be done in-country with our prospective partners and the government before a full basin-wide development plan can be mutually agreed and the said milestones are achieved,” the company said in response to questions by The EastAfrican.
The company says while details are still to be agreed with the government of Uganda “and our partners, at the moment we are estimating that peak production from the field will be approximately 200,000 barrels of oil a day.”
The EastAfrican has seen documents Tullow has made public before that talk of a hub concept with all fields tied to a common gathering infrastructure and a small refinery in the region of 50,000 barrels per day.
The high-tech refinery is expected to provide enough oil products for Uganda, eastern DR Congo, Southern Sudan and Rwanda while the remaining 150,000 barrels of excess crude oil will be exported through either Mombasa or Dar es Salaam to maximise the value of resource.
“Export could initially be by road and rail. Ultimately, a pipeline will be built,” Tullow says in one of its presentations.
This aspect of the programme is seen as being overly optimistic since none of that infrastructure currently exists on a scale sufficient to support such a programme.
Procrastination within the Ugandan bureaucracy and catfights over stakes in the different opportunities are also seen as a potential factor that could delay implementation.
Already, what should have been a straightforward execution of pre-emptive rights when Heritage sought to exit the fields last December, is still stuck awaiting government approval.
This scenario could become more complicated as Tullow moves to seek approval for plans to farm out its fields to Total and the China National Offshore Oil Company, which is also still stuck in the corridors of power.
“We have progressed well beyond talk and the GoU has received all the required details of the transparent farmdown process and Tullow’s pre-emption of Heritage Uganda.
The proposed partnership with CNOOC and Total will allow the ideal opportunity to align new basin partners capable of delivering a holistic world class development solution for Uganda within the stipulated timeframes, with the ‘best in class’ proven capacity to do so. We anticipate GoU approval in the coming weeks,” the company says.
While there are two possible extraction sites at the moment, Tullow says the initial extraction point will only be decided as part of the approved basin-wide development plan and “the building of appropriate infrastructure (including roads) will be a critical path component of all development planning.”