August 30, 2016 / 10:06 AM / a year ago

Uganda gives Tullow Oil, Total production licences

KAMPALA (Reuters) - Uganda granted on Tuesday five production licenses to UK-listed explorer Tullow Oil and three to France’s Total, clearing a major hurdle as the east African country aims to move more quickly toward crude production.

Commercial oil reserves were discovered in Uganda a decade ago, but production has been repeatedly delayed amid wrangling over taxation and field development strategy.

The licenses cover Exploration Area One (EA1), operated by Total, and Exploration Area Two (EA2), operated by Tullow, Energy Minister Irene Muloni told reporters.

Muloni said the offer of licenses ended a period of protracted negotiations and it was “now time for serious work to start.”

“The grant of these production licenses will trigger the immediate work program ... for production of petroleum in Uganda.”

Total, Tullow, and China’s CNOOC jointly own Uganda’s fields and the Chinese firm was the first to be granted a production license in 2013.

The licenses offered on Tuesday are valid for 25 years and can be renewed for an additional five years.

Tullow and Total are required to make final investment decisions 18 months after receiving the licenses and Muloni said commercial oil production was expected to begin in 2020.

When production from all the nine licensed areas starts, output would be between 200,000-230,000 barrels per day, Muloni said.

Uganda wants to build a $2.5 billion refinery to process its crude so it can earn more from its oil resources, which it discovered in 2006.

Efforts to secure a private developer and operator of the facility are underway.

The domestic refinery, aimed at processing 60,000 barrels per day, will reserve the right of priority access to the Ugandan crude and the remainder will be exported via a crude pipeline to the Indian Ocean port of Tanga.

Tullow and Total are expected to invest a combined $8 billion in infrastructure required to support oil production, including drilling 500 wells and erecting central processing facilities and feeder pipelines.

Uganda has 6.5 billion barrels worth of reserves in its fields located near its border with the Democratic Republic of Congo, according to estimates by government geologists.

Reporting by Elias Biryabarema; Editing by George Obulutsa and Mark Potter

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