* Taxes, refinery wrangles have held up commercial
* Government has said wants 40 percent stake in refinery
* Total says hopes for agreement on commercialisation this
By Elias Biryabarema
KAMPALA, April 15 Uganda agreed with France's
Total and China's CNOOC to build a much
smaller refinery than it had wanted, in a compromise removing
one obstacle to commercial output of the country's oil.
The Ugandan government said on Monday it agreed with the two
energy companies on an initial processing capacity of 30,000
barrels per day - well below the 200,000 bpd it had earlier
Rather than build a major refinery in Uganda, Total and
CNOOC have favoured a pipeline to export most of its crude via
Kenya's Indian Ocean coastline, saying there was insufficient
local demand for a refinery of the size Uganda wanted.
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 since stalled production.
"The two parties however agreed to start with the refinery
size of 30,000 barrels per day," said a statement published by
the office of President Yoweri Museveni after he met executives
from Total and CNOOC.
Museveni stressed he wanted a final deal quickly, in the
form of a memorandum of understanding that would include the
construction of a pipeline to neighbouring Kenya for exports.
"We have wasted too much time. We are now with the issue of
oil for seven years. We need to make our final decisions,"
Museveni told the oil companies and government officials.
Total and CNOOC entered Uganda's petroleum sector early last
after both took up a third each of British explorer Tullow Oil's
exploration assets for a total $2.9 billion.
A Total Uganda spokeswoman said that during the meeting they
had stressed the need to combine a refinery and a pipeline to
achieve the maximum value from Uganda's oil.
"We are hopeful that we will soon reach a convergence of
view with the Ugandan authorities and that 2013 will mark the
agreement and sign-off of the development and commercialisation
scheme with the Government of Uganda," the Total spokesperson
for exploration and production, Ahlem Friga-Noy, told Reuters.
"Such achievement will then pave the way to necessary steps
to be taken to reach the final investment decision which will be
the launching point towards construction phase and first oil."
Uganda has said it wants a 40 percent stake in the refinery.
A U.S. investment firm, Taylor-DeJongh, is helping the
government get financing for the project, Ugandan officials say.
Museveni wanted to refine crude locally to boost domestic
earnings, help fund new infrastructure and provide cheaper
The president still targets a refinery with an eventual
capacity of 60,000 bpd, projecting that demand in the local
market will keep rising, according to the statement.
"This agreement is a win for Total and CNOOC as a lack of
approval for the consortium's development plan was the key
hurdle preventing production from coming on line," said Clare
Allenson, Washington-based Africa analyst for political risk
consultancy Eurasia Group.