Income expected to total $909mn when two transactions have been completed and full payments made
According to the latest ministry of Finance,Planning and Economic Development publication titled "The Background to the Budget" for fiscal year 2011/2012,the first transaction involved Heritage Oil company selling its interest to Tullow Oil Company Limited in the past financial year while the second transaction was related to the subsquent sale by Tullow Oil Company Limited part of its shares to China National Offshore Oil Corporation(CNOOC) and Total Uganda.
"This latter transaction was in line with the government's policy of not creating monopolies in such strategic areas such as the oil sector," it notes.
Success rate
The publication says a total of over 55 exploration and appraisal wells have been drilled in the country and out of these, 51 wells have encountered oil and or gas in the subsurface representing a success rate of over 92 per cent.
"Since the first discovery of oil was made in 2006, a total of 18 fields have been discovered with approximately 2.5bn barrels of oil equivalent in place.However,with only 30 per cent of the total prospective area explored,the number of fields and prospects discovered is expected to increase and hence a further increase in oil reserves," the document states.
It adds that it is estimated that the discoveries made to date can support production of over 100,000 barrels of oil per day(BOPD) for twenty five years and are therefore sufficient to implement large scale refining in the country.
However,as Uganda is poised to become one of africa's newest oil producer following the discovery of oil in the Albertine Graben in western Uganda,tax officials caution that the country lacks the necessary skills to collect oil taxes which could hinder the country's bid to raise domestic revenues.
Uganda Revenue Authority (URA) Commissioner General Allen Kagina,speaking at a recent workshop,notes that although the oil sector has a potential to generate a lot of revenues for the country,the knowledge on how to levy taxes on the industry was limited adding that if the government is to increase domestic resource mobilisation,there is need to increase skills so as to tax the extractive industries.
The government says it is promoting the development of an oil refinery to refine the crude oil and supply petroleum products to the national and regional markets and the refinery development will go through five stages.
These include feasibility study,Project Structuring Promotion and selection of project developers/investors,Front End Engineering Design (FEED), Engineering Procurement and Construction (EPC) and commissioning.
Feasibility study
The ministry of Finance publication says government has also undertaken a feasibility study into the development of an oil refinery in Uganda and the study determined that it's feasible and viable to develop a refinery in Uganda.
"On the basis of the current level of oil discoveries and market conditions,the study recommended that a 60,000 bopd refinery should be constructed with the option to be expanded to 120,000 bopd and 180,000 bopd in a phased manner in future." It adds that the study has recommended the construction of a pipeline from Hoima to Kampala to move petroleum products from the refineries to the market.
The government is also considering the phased approach and will start with 200,000 barrels per day early refinery in the short term,which will be upgraded to 60,000 barrels per day refinery in the long term with a possibility in future to upgrade the refinery to 120,000 barrels per day.
By Geoffrey Muleme
