UGANDA will start producing crude oil this year, Tullow Oil, the Irish firm exploring for oil and gas in Uganda, disclosed.
Speaking to journalists in Kampala yesterday, Paul McDade, the chief operations officer, announced that initial oil production will be 500-1,000 barrels per day, which will progressively rise to 10,000 barrels next year and to 150,000 barrels in 2015.
“We will start producing about 500 to 1,000 barrels a day in the middle of this year,” he said.
“This is not economically significant but it is a great step forward for Ugandans to know that their oil is being used for industrial use.”
McDade said the oil will be produced from the Kasamene field in Buliisa and will be used for the local industry and power generation.
Kasamene is located in block 2, which is fully owned by Tullow Oil. The other two oil fields, blocks 1 and 3A, are jointly owned with Heritage, which is in the process of selling off its 50% stake.
“We would like to produce oil on a test basis to see how the oil wells behave and how the crude can be transported by truck since it is waxy. We will have to heat the oil to keep it flowing,” McDade explained.
Tullow plans to invest between $300m and 400m in this initial phase but raise the amount to $5b to produce 150,000 barrels per day.
McDade disclosed that the two companies which Tullow preferred to work with were the Chinese state-owned CNOOC and French Total.
“The Chinese are best in building refineries and they move fast. CNOOC has just built a big refinery in China which can refine the same quality of oil as in Uganda. They built it in a period of two years.”
He added that they are also looking forward to work with the Ugandan national oil company that is in the process of being formed.
Reacting to criticism that they have not delivered on the early production scheme, the Tullow boss said they preferred drilling more wells to assess the total oil reserves rather than spending all their money on one small oil field.
“A refinery is a very expensive project for both the private and public sector. You cannot put in place a refinery unless you are sure that you have enough oil supply for 20 or more years.”
He said Tullow together with its partner, Heritage, has invested so far about $700m in Uganda.
The London-listed company yesterday also announced that they placed 80 million new shares on the London stock exchange to fundraise for its operations in Uganda and Ghana.
