Uganda will demand tougher terms in the next round of Production Sharing Agreements (PSAs) it plans to negotiate with foreign exploration firms eyeing its Lake Albert reserves, a senior government official said. Interest has grown in the east African country's hydrocarbon sector. Britain's Heritage Oil and Tullow Oil estimate reserves discovered near its western border with Democratic Republic of Congo at some two billion barrels.
The details of PSAs already signed with explorers already have not been made public, but the commissioner of the state-run Petroleum Exploration and Production Department told Reuters that recent finds had strengthened the government's hand. "When we signed the first agreements we were in a weak position, few companies were willing to invest a lot of money where the prospect of finding oil was still extremely uncertain," Ernest Rubondo said on Thursday in an interview.
"But our petroleum potential now is very clear and the risk of failing to strike oil has been diminished, and we will now demand stronger and far better terms in the next PSAs." Rubondo said the government would resume licensing exploration companies - which it halted in 2007 - at the end of 2010 when a new petroleum law is expected to be in place.
A total of 8,000 square km (3,089 square miles) is still unlicensed, and Rubondo said some 60 companies had already expressed interest in bidding for the acreage. "The interest in our oil is overwhelming and we're also now getting big names showing up," he said, without elaborating.
He said the Ugandan government planned to start building a refinery in the second half of 2011, and that it had signed a deal last week with Switzerland's Foster Wheeler Corporation for a six-month feasibility study at a cost of $1.6 million. Rubondo said a government study had shown that east Africa consumed some 150,000 barrels of oil a day and that demand was growing at around 5 percent a year - meaning the region needed another refinery to complement the one in Mombasa, Kenya.
"That is the basis of our focus on refining, rather than exporting crude," he said. Next year, he added, the government would focus on developing a power plant to generate electricity from gas reserves discovered at Nzizi well in Exploration Area 2 and crude petroleum generated during well production tests.