Tullow says Uganda output may double

Explorer Tullow Oil said it could end up producing more than twice as much oil as expected in Uganda in the coming years if the…

Explorer Tullow Oil said it could end up producing more than twice as much oil as expected in Uganda in the coming years if the right development plan is adopted.

Chief executive Aidan Heavey said output from the Ugandan side of the Albertine basin could ultimately be well ahead of the current target of 150,000 barrels per day (bpd) in three years.

"When the basin is on full production we feel at this stage we're probably talking about 350,000 bpd," said Mr Heavey.

A Tullow spokesman said the 350,000 bpd reflected the potential of the Ugandan fields and would take at least five years to reach. The company retains its 150,000 bpd target.

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This target is based on Tullow's initial development review. Since then, the company has found more oil and investors have been hoping the target might be raised.

The government and the parties involved in Uganda's nascent oil industry have yet to agree a development plan for the fields, which executives believe contain billions of barrels of oil.

A pipeline will need to be built to move crude to the Kenyan coast for export to markets around the world. The government is also interested having a refinery built, which could result in the export of oil products to regional neighbours.

The exact plan for field will determine the final output level, the spokesman said.

The London and Dublin-listed Tullow has agreed a sale for partner Heritage Oil's 50 per cent stake in two promising Ugandan exploration areas and plans to sell on some of the assets to another partner who will help with the construction of the refinery and export pipeline.

Mr Heavey said he may choose both China's CNOOC and France's Total as partners.

"The investment is going to be huge. You are talking about multiple billions of dollars of investments," said Heavey. "The only two companies that are currently in the final process are CNOOC and Total."

"It would be good if both were involved," he said.

The Ugandan government said this week the country would require $8 billion to develop the oil industry.

Tullow and Heritage control three oil blocks that cover the Ugandan side of Lake Albert but the explorers lack the technical and financial resources to develop the complex project by themselves.

Uganda's parliament has began inquiries into production-sharing agreements after environmental and human rights activists complained the deals the government has made give a disproportionate chunk of the proceeds to foreign firms. The inquiries are expected to take two weeks,

Mr Heavey rejected the campaigners' criticisms and said he was asking Uganda to ease its terms in order to ensure development of the region's more costly offshore reserves.

"It is going to be very difficult to develop oil in Lake Albert off-shore without getting improved terms," he added.

Mr Heavey added that Tullow was waiting for neighbouring Democratic Republic of Congo to ratify its contract for two exploration blocks on the opposite side of Lake Albert.

"It is important that the Congo and Ugandan side are developed to the same standards. You have to otherwise you are going to have unrest in the whole area," he said, warning people living in the regions could migrate for better services and paying jobs.

Tullow is also exploring for oil off Africa's West coast, where it expects to find "world class" reserves.

The exploration zone stretches west of Tullow's Jubilee field offshore Ghana, which is now reckoned to hold 800 million barrels of exploitable reserves and is set to begin producing in November, ramping up to 120,000 bpd by the middle of 2011.

Reuters