Uganda's oil prospects excite experts

News | November 25, 2009

Agencies
Kampala

Uganda is in a pole position to become one of the top 50 oil-producing countries in the world in six years, according to experts.

Thomas Pearmain, African energy analyst at IHS Global Insight, says the proposed deal for Italian Energy giant, Eni S.p.A, to buy the country’s six oil wells in the Albertine region from Heritage Oil and Gas Company at $1.5 billion (Shs2.8 trillion) is a blessing.

He says the acquisition will bring in much-needed financial resources and expertise for development of energy infrastructure – refineries, terminals and pipelines – to fully exploit oil deposits estimated to be in excess of 6 billion barrels.

"Eni has done its homework on Uganda and is very keen," he says, "To develop these resources is going to require multiple billions of dollars in investments, and Eni would not want access to Uganda's oil if the prospects were not good."

Uganda’s oil wealth was discovered in the 1920s and maiden well sunk in 1938. But World War II and a flood of local political unrests until mid 1980s did scupper efforts to ascertain the quantity of the hydrocarbons underground.

A number of foreign firms, among them Heritage and Tullow Oil Company, have now struck substantial oil quantities in the Bunyoro area after years of explorations. These discoveries have encouraged Neptune to pioneer drilling in West Nile region as investors clamour for the country’s remaining two-third potential oil sites.

Tim O'Hanlon, Tullow’s vice President for Africa business, says the company's blocks here have the potential for reserves of more than 2 billion barrels of oil. Some analysts, however, belief this is a conservative estimate of total find in the present nine active exploration blocks.

"They have just been scratching the surface so far," says Pearmain. He adds: "Results have been very successful. All but one of 25 wells has found oil or gas -- an amazing strike rate. There is a lot of acreage that has not yet been touched."

Uganda has already attracted around $500 million in exploration investment but it will take billions more to bring on the oilfields already identified.

Eni, which is buying a 50 percent interest in blocks 1 and 3A around Lake Albert from explorer Heritage Oil, is expected to build a pipeline eastwards from the lake, possibly to the Kenyan port of Mombasa, the nearest harbour 1,300 km (813 miles) away and a potential export center for Ugandan oil.

The costs will be high. And the pipeline will need to be heated as the oil is waxy.

Source: http://www.monitor.co.ug/artman/publish/news/Uganda_s_oil_prospects_excite_experts_95100.shtml