Oil revenue could double Uganda’s wealth

By Patrick Kagenda

The Independent’s Patrick Kagenda talked to Brian Glover, Tullow Oil’s Business Unit Manager for Uganda and East Africa.

When is the Early Production Scheme (EPS) likely to begin?

We are finalising details to put together an early power project in the Kaiso-Tonya area. Hopefully we shall have a transmission line by the end of 2010. That would mean that gas and oil would be the basis of power generation. At this stage we won’t be producing petrol or diesel. What is important to understand is that the Kaiso-Tonya crude oil is waxy and therefore refining it is complicated.

We are in discussion with government and it is undertaking a study on how big the refinery should be. Obviously you need to consider the market, how big it will be and the location of the refinery as well. Refining will come later and this is the agreement between Tullow and the government. The refinery will take a lot of building and fabrication. So it could take several more years before those plans are finalised.

How many Production Sharing Agreements (PSAs) have you concluded with the government?

The Production Sharing Agreement we have is for block II where we are the operator of the exploration area II. There are two other blocks we are interest in: Area 3A in the south and Exploration Area I in the north. Both are areas operated by Heritage Oil. So we are involved in three production sharing agreements.

What do the production sharing agreements say, what will Tullow take, and what will government take?

When you sign agreements there are some clauses that remain confidential. You don’t disclose all the contents of your agreements because your competitors could use them. That information could become public when government has passed the oil bill.

What is the amount of oil you have so far discovered?

The safe figure at the moment is about 700 million barrel mark of discovered oil shared between Tullow and Heritage. In terms of what else is out there, probably over one billion barrels of oil in the Ugandan part of the Albertine region.

How long would that take Uganda as an oil producing country?   

If we look at 150,000 barrels a day, you could have 20 or 25 years of that level of production in Uganda. That is significant and could put Uganda in the top 50 oil producers in the world.

Are you going for a fully fledged refinery or a mini refinery?

One of the current understandings of the oil in Uganda is that you can just turn it into diesel easily. The nature of the oil means that in a very crude refinery or a very simple refinery you would end up with a large amount of heavy fuel oils of about 70%. In that case there would not be much you could do with the heavy fuel other than use it for power generating. The most important aspect of refining crude oil would be to trade diesel and all these other products. Therefore you need a much more sophisticated refinery to do that.

How much are you to invest in building a refinery?

We are an upstream oil and gas company. What upstream means is that we explore oil, develop and produce it. We are not an oil refining company. We will partner with experts in that area.

What by-products are expected out of that crude oil?

Certainly in a high tech refinery you could generate diesel, petrol, naphtha kerosene and some level of heavy fuel oil. When you are producing 150,000 barrels of oil a day, you only need about half of that to generate enough products for Uganda. In other words there is enough oil discovered already to provide products for all Uganda’s needs today.

How much money has Tullow invested in the oil exploration in Uganda?

I am not sure of the amount right now. But it’s hundreds of millions of dollars. It’s not a cheap game exploring oil.

What developments have you put in the area as your Corporate Social Responsibility?

We have spent about one million dollars in corporate social responsibility programmes in Hoima and Buliisa. We are involved in four areas- health, education, environment and building small and medium enterprises. We work closely with DED (Germany development agency) and USAID in HIV/Aids awareness programmes. We built a maternity ward in Kyehoro which cost $68,000(about Shs 143 million). We have also set up a honey bee farm where we are producing more honey than the oil. We planted over 40,000 trees in the last year. We are also drilling water wells in Kaiso- Tonya and Buliisa district. We built a school at Nkondo and another one at Kyehoro.

Chinese and Iranians have expressed interest in assisting the government in building a refinery; what is your view?

I think it’s very positive that the government is learning and listening to other countries’ experiences. As I said we are an upstream company and we are ready to develop and produce the oil and I hope a refinery can be built quickly in Uganda.

In Ghana, Shell and Tullow are working together at jubilee fields, why not here in Uganda?

We don’t work with Shell in Ghana. We work with another company called Kosmos.  Kosmos is actually a very small company in America and they are in jubilee fields. We don’t have any constant partnership.

Does the First Family have interests in Tullow because we hear one of the in-laws is working with you? Whose interests is he representing?

We don’t have any First Family member working with us.