Bloomberg News

Tullow Says Ugandan Crude Needs Two Years to Start Flowing

December 07, 2012

Tullow Oil Plc (TLW), which found oil in Uganda in 2006, said delays in agreeing with the East African government on a plan to develop a refinery and export-pipeline means it will be at least end-2014 before crude starts flowing.

It will take a minimum of two years to start initial-stage production, which involves selling unrefined crude to heavy-fuel users in Uganda, Tullow’s Vice-President of African Business Tim O’Hanlon said yesterday in an interview.

Delays could last even longer while Tullow and its partners Total SA (FP) and CNOOC in the Lake Albert fields try to narrow differences with the state on a three-prong development plan, he said. Issues under discussion include financing arrangements and processing capacity for a planned refinery in Uganda and the terms of pipeline-construction to ship the crude to markets abroad, O’Hanlon said in Kigali, Rwanda’s capital.

“The quickest one is the consumption of crude by local industries and that could take place within the next 24 months,” O’Hanlon said. “But we can’t guarantee that because we have to get approvals to be able to do that, and we’d like a holistic development plan to be approved in its entirety before.”

O’Hanlon, speaking on a panel on Dec. 5 at an infrastructure conference in Kigali, called for transparency and predictability in the way governments deal with oil and gas developers. Production-sharing contracts kept secret from the public are usually a condition from the governments, not companies, he said.

‘Time is Money’

“Time is money, and the money will only flow when the oil is being sold, either through refinery gates or into a vessel off the coast and that’s taking longer than we hoped” in Uganda, he said in the interview. “But the private sector is always in a hurry and governments are often going slower than ideal because they are trying to get it spot-on right for their countries.”

London-based Tullow, which has the most oil licenses in Africa of any company, announced in March the first oil discovery in Kenya, which borders Uganda, along with its partner in the project, Africa Oil Corp. (AOI) They have yet to determine whether it’s commercially viable to develop the deposit.

Tullow’s stock closed 1 percent lower at 1,242 pence in London yesterday, paring its gain this year to 11 percent, compared with a 5.6 decline in the FTSE 100 Index.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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