UPDATE 1-Total eyeing South Sudan-Uganda oil pipeline

Wed Dec 7, 2011 8:39am EST

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By Tom Bergin

DOHA Dec 7 (Reuters) - French oil major Total said it could build a pipeline from South Sudan to Uganda that would continue to Kenya's coast, potentially solving the fledgling state's headache about how to export its oil.

Total Christophe de Margerie said his company had proposed to Uganda that a pipeline that is planned to bring Ugandan oil to a Kenyan port be built so it could be extended to South Sudan.

"The pipe, which is supposed to be from our potential blocks, because they are not yet our blocks in Uganda, could be, effectively, a hub for different sources of crude," de Margerie told a press conference at the sidelines of the World Petroleum Congress.

"We say to Uganda as part of our long-term view you have to take into consideration what sort of oil can come from neighbour countries to make the pipe less expensive," he added.

Landlocked South Sudan took two-thirds of Sudan's 500,000 barrels a day of oil production when it became independent in July, but it is now locked in a row with Khartoum over the use of the northern pipeline to the Red Sea.

Khartoum has demanded a $32 a barrel fee to use the pipeline to Port Sudan, which is more than 10 times typical industry levels, taking account of construction cost and distance.

South Sudan has talked to companies about building a pipeline directly to Kenya, but analysts say it would be difficult for the country, which still suffers civil strife, to raise the funds required or overcome other logistical challenges.

Connecting with the pipeline planned for Uganda to Kenya could significantly cut the total cost.

Total has agreed to buy into oil blocks in Uganda where London-based Tullow Oil has discovered recoverable reserves of 1.1 billion barrels, and potentally as much as 2.5 billion barrels, and Total also owns a potentially oil rich licence in South Sudan.

De Margerie said there was no timeline for construction of the pipeline. "It's just thoughts today," he said.

He said Malaysia's Petronas and China's CNPC, which have currently operating in South Sudan, could also be interested in the project.

Separately the CEO said Total was shutting down oil and gas production in Syria after the European Union imposed sanctions.

De Margerie said he did not believe a proposed EU embargo of Iranian oil, related to concerns about the country's nuclear programme, would have any impact on the Islamic Republic.

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