Tullow Uganda may be delayed

Output from Ugandan crude deposits being developed by companies including Tullow Oil and Total is unlikely to be exported as soon as the nation expects because of the scale of the infrastructure projects required to move the fuel out of the country.

Tullow Uganda may be delayed

The government of Uganda, where oil was discovered in 2006, said it expects to begin shipping crude within five years.

To do that, it must overcome challenges facing East Africa neighbours such as Mozambique and Tanzania, where a lack of finance and technical capacity to build multiple, capital-intensive infrastructure projects is delaying the start of natural-gas production.

“Everything being done in Uganda is for the first time ever, everything can be a risk,” said Will Hares, an analyst at Bloomberg Intelligence.

“Timetables are prone to slipping, especially in frontier regions. All stakeholders would suffer from project delays.”

Landlocked Uganda has an estimated 1.7bn barrels of recoverable oil at fields in the Lake Albert basin the government expects Tullow, Total and China’s CNOOC to start pumping by 2021.

The government has estimated it will receive $43bn (€39.6bn) of revenue from the resource over 25 years.

Developing the fields to commercial production requires about $8bn, though engineering design work on the project has “yet to start”, said George Cazenove, a spokesman for Tullow.

For production to begin in 2021, Tullow would have to make a final investment decision on the project by 2018, according to Mr Cazenove.

The crude would then need to be ferried along a yet-to-be built 1,400km pipeline to the Indian Ocean port of Tanga in neighbouring Tanzania. The Ugandan government this week opened a tender for surveys of the route for the conduit.

Uganda expects the pipeline, which is backed by Total, to be ready in three years, said Robert Kasande, acting head of the state-run Petroleum Directorate. The government is considering building an airport in the region to speed up logistics.

The development of Uganda’s oil industry has been slow. The Ugandan government took 10 years to issue production licenses to Tullow and Total. In addition, in April it reversed a decision to route the pipeline via Kenya, deciding to go via Tanzania instead.

The challenges of co-ordinating the cross-border project between Uganda and Tanzania has “substantially raised the probability of a delay”, BMI Research said


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