UPDATE 1-Uganda aims for commercial oil output by 2016

Wed Jun 19, 2013 7:53am EDT

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By George Obulutsa

NAIROBI, June 19 (Reuters) - Uganda is aiming for commercial output of oil by 2016 at the earliest, as the landlocked east African nation seeks cheaper energy and funds for infrastructure projects.

Explorers struck oil in east Africa's third largest economy in 2006 and Uganda estimates its crude reserves at 3.5 billion barrels, but wrangling over taxes and the viability of a local refinery have stalled production.

Uganda currently transports all of its fuel - imported primarily through Kenya's Mombasa seaport - in tankers over several hundred kilometres of road. Officials say the method is unreliable, costly and damages roads.

Fred Kabanda, principal geologist at Uganda's petroleum exploration and production department, said a 30,000 barrel a day refinery is expected to be operational in 2016 at the earliest, with output expected to double two years from then.

The third-biggest economy in east Africa aims to build the refinery as a private-public partnership with its neighbours, in exchange for a stake in the facility, he said.

In April Uganda agreed with France's Total and China's CNOOC to build a smaller refinery than it had wanted. The companies favoured a pipeline to export most of the crude via Kenya's Indian Ocean coastline, saying there was insufficient local demand for a refinery of the size Uganda proposed.

Total and CNOOC entered Uganda in 2012, taking up a third each of British explorer Tullow Oil's exploration assets for a total of $2.9 billion.

(Writing by James Macharia; Editing by Louise Heavens)

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