Uganda set to be top-50 oil producer

LONDON, Tuesday

A deal this week has brought Uganda a step closer to becoming a significant oil producer, offering billions of dollars of fresh investment to develop newly discovered oilfields.

Italian energy giant Eni said on Tuesday it had agreed to buy a stake in two large oil exploration blocks in Uganda for up to $1.5 billion.

For a decade, exploration in the land-locked former British colony has been carried out by a handful of independent oil companies who have drilled a series of successful wells but who lack the large amounts of capital or expertise on their own to bring the local oil industry to its full potential.

The entry of Eni, an integrated oil company with enough cash to build pipelines, terminals and refining capacity, heralds an escalation of development, which analysts say is likely to make Uganda one of the top-50 oil producers by 2015.

Very keen

“Eni has done its homework on Uganda and is very keen,” said Thomas Pearmain, African energy analyst at IHS Global Insight.

“To develop these resources is going to require multiple billions of dollars in investments, and Eni would not want access to Uganda’s oil if the prospects were not good.”

Oil was first discovered in the region in the 1920s in the Albertine Graben - the northern most part of the East Africa Rift system - and the first well was sunk in 1938.

But World War Two and political instability in Uganda between 1940 and the 1980s meant there was limited exploration.

Economic stability

The search for hydrocarbons began in earnest in the 1990s after a return to political and economic stability following President Yoweri Museveni’s ascent to power.

Uganda now has nine exploration blocks from its northern border with Sudan through Lake Albert on the western border with the Democratic Republic of Congo and south to Lake George. (Reuters)