Uganda drafts policy to attract investors

Jul 10, 2006 02:00 AM

Uganda has drafted a policy to manage its oil and natural gas resources now that early tests in the Lake Albert region have shown that the country has commercially exploitable reserves.
The policy seeks to ensure that the country benefits from any oil reserves that might be discovered, Permanent Secretary in the Ministry of Energy and Minerals Fred Kabagambe-Kaliisa said earlier. He told the policy will also seek to encourage investment by petroleum companies and offer guidelines on oil exploration, transportation and marketing.

The Norwegian government has already given the Energy Ministry $ 1.8 mm to be used to strengthen the policy, train staff, build networks and set up a database over a three-year period. The policy will be an improvement on the existing Petroleum Exploration and Production Act 2000, which grants exclusive rights for exploration, development and production of petroleum in any licensed area.
Under the Act, the size and location of the acreage to be included in the Production Sharing Agreement is settled by negotiation. An exploration licence is awarded for a period not exceeding eight years, divided into an initial exploration period not exceeding four years, a first extension period not exceeding two years and a second period not exceeding two years.

Uganda has so far defined five exploration areas in the Albertine Graben region. Three have already been licensed -- the first to Heritage Oil and Gas (former Energy Africa) in July 2004; the second to Hardman Resources and Tullow Oil in October 2001; and the third was re-licensed to Heritage in September 2004.
In September 2005, Neptune Petroleum, now called Tower Resources, acquired exploration licence over the fifth area. According to the Petroleum Exploration and Production Department in Entebbe, Exploration Areas 3 and 4 are still available for licensing.

The draft policy also details the possible alternatives for transportation of oil if economically viable quantities are discovered. The options include laying a crude-oil pipeline to the oil refinery in Mombassa if there are substantial amounts. The pipeline will run alongside the existing Kenyan pipeline from Mombassa refinery to Eldoret and Kisumu in western Kenya.
The existing railway and road network will provide an alternative means for transportation of the refined petroleum products. For the marketing policy or downstream, a single oil company will be assigned to market the oil, preferably the national oil operator that Uganda lacks.

However, there is an assured potential market for oil products from Uganda. A report from the Petroleum Exploration and Production Department in Entebbe says that an estimated 150 mm people in the region constitute potential consumers of Uganda's petroleum products.
The market embraces western Kenya, Southern Sudan, Uganda, northern and western Tanzania, Burundi, Rwanda and the eastern Congo.

Total oil-products consumption in this region is estimated at over 5 mm tpy, but considering that Uganda is a member of Comesa and the Preferential Trade Area (PTA), most of whose members do not produce oil, the market could be bigger still, says the report.
An estimated 150 mm people in the East and Central African region constitute potential consumers of Uganda's petroleum products.

Source: The East African
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