Uganda signs refinery and pipeline deal worth $12bn

The Ugandan government has signed an agreement with Tullow Oil, Total and China National Offshore Oil (CNOOC) to construct an export pipeline and refinery at an investment worth $12bn.

The proposed new refinery is expected to process about 30,000 barrels of oil a day, reported the Wall street Journal.

The government and the oil companies are also planning to construct three potential export pipelines.

Negotiations are underway on the country’s final oil-development plans, while both sides are expected to reach a final deal in the next few weeks, according to government officials.

The parties have not yet decided on the production targets for the project.

Uganda President Yoweri Museveni was quoted by the publication as saying the country has wasted seven years of time with issues related to oil production.

"We are hopeful that… 2013 will mark the agreement and sign-off of the development and commercialisation scheme with the government of Uganda," the three companies said in a joint statement.

Uganda, which is expected to contain about 3.5 billion barrels of untapped oil reserves, will join sub-Saharan Africa’s Nigeria, Angola and Sudan as major crude producers in the area.

The government had planned to construct a refinery with the capacity to process about 180,000 barrels of oil a day, but oil companies had refused on the grounds that it would be to expensive to construct.

The government wants a gradual production increase to avoid rapid depletion of reserves, while oil companies are aiming for faster growth, with a production rate of 200,000 to 230,000 barrels a day by 2020.

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Image: Uganda President Yoweri Museveni. Photo: Courtesy of Paul Morse.