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Oil & Gas Africa: Uganda Heats Up Oil Race With Production Licenses Award

Oil & Gas Africa: Uganda Heats Up Oil Race With Production Licenses Award

Uganda has heightened its oil race with its east Africa neighbor, Kenya after it awarded eight production licenses with an eye on having products in the market by 2020.

Uganda granted on Tuesday eight production licenses to France’s Total and UK-listed explorer Tullow Oil, paving way for a final push towards commencement of commercial production.

Uganda’s Energy minister Irene Muloni was quoted by Reuters saying the licenses cover exploration Area one (EA1), operated by Total and Exploration Area Two (EA2) which is operated by Tullow.

Three of the licenses were issued to Total while five were issued to Tullow.

The licenses are valid for 25 years and can be renewed for an additional five years. Tullow and Total are required to make final investment decisions 18 months after receiving the production licenses with Muloni indicating that commercial oil production was expected to begin in 2020.

“The grant of these production licences will trigger the immediate work programme … for production of petroleum in Uganda,” Muloni said.

Pipeline

The announcement by Uganda came just days after Kenya announced it had finalized an agreement with oil explorer Tullow Oil and its partners Africa Oil and A.P. Moller-Maersk for the development of a crude oil pipeline.

A statement from President Uhuru Kenyatta’s office quoted Energy and Petroleum Minister Charles Keter as saying the three partners and the government had finalized the pipeline’s development plan.


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“He said the Government and its upstream partners, Tullow Oil, Africa Oil and Maersk Companies, have concluded a Joint Development Agreement (JDA) for the development of the pipeline,” the statement said following a meeting in Nairobi between President Kenyatta and Tullow Plc chief operating officer, Paul McDade.

The Kenya government and the companies are pushing to start small scale crude oil production in 2017, at about 2,000 barrels per day to be initially transported by road.

“We have started and we are not moving back. We want to be at the top of the pile. So, we have set a path and by 2019, Kenya is going to be a major oil producer and exporter,” Kenyatta said in the statement.

Plug

Rivalry between Kenya and Uganda has heightened since April after Kampala pulled the plug on an earlier pipeline deal for a joint petroleum project with Nairobi.

Uganda decided to build a pipeline for its oil through Tanzania rather than Kenya, which had wanted to secure the export route.

France’s Total, one of the oil firms developing Uganda’s fields, had raised security concerns about the Kenyan route citing militants who have recently launched attacks on Kenya and favored an option to build a 1,120 kilometer oil pipeline between Tanga and Uganda.

On the other hand Britain’s Tullow Oil, with stakes in both countries, had backed the Kenyan route, saying it would be cheaper if oil from both pipelines followed the same route.

Kenya in response opted to embark on the construction of its own pipeline—after months of spirited attempts to woo Uganda into the joint project it was to pursue with other regional states under a public-private partnership (PPP) model.

In April, Keter said the pipeline – to run 891 km between Lokichar and Lamu on Kenya’s coast – would cost $2.1 billion and should be completed by 2021.

A joint Kenya-Uganda pipeline deal was considered highly viable thanks to the massive discoveries of petroleum in landlocked Uganda.

An estimated 6.5 billion barrels of oil were discovered in the Albertine basin in Uganda near the border with Democratic Republic of Congo (DRC). In Kenya it is estimated that the recoverable reserves total an estimated 750 million barrels of crude.

LNG Race

Apart from the Kenya-Uganda oil race, the region is also witnessing a liquefied natural gas (LNG) production rivalry between Tanzania and Mozambique.

The two countries are in a vicious race to become Africa’s newest LNG exporter and snap up contracts before supplies from rival producers in other parts of the world come to market. Both nations have a targeted of exporting gas by early 2020s.

Tanzanian president John Magufuli last week ordered officials to speed up long-delayed work on a planned LNG plant, noting that implementation of the project had taken too long.

“I want to see this plant being built, we are taking too long. Sort out all the remaining issues so investors can start construction work immediately,” the presidency quoted Magufuli as saying in a statement.