Uganda will need $8 billion in investments in the next decade to develop its newly discovered oil and gas resources and bring them to the marketplace, a senior government official said.
East Africa’s third largest economy struck oil in its western region in 2006 and has seen a surge in investor interest in its nascent petroleum industry.
Uganda needs the money to finance continued drilling and field appraisal, construction of a refinery and storage facilities, a pipeline, a power plant and transmission lines, Kabagambe Kaliisa, the energy ministry’s permanent secretary, told a parliamentary committee on natural resources.
“The attraction of strong and well capitalized companies… is an important benefit for the country to mitigate against the imminent financing/investment risk in the sector” Kaliisa said.
Licensed oil companies in Uganda were unable to raise that much capital, he said.
Russia’s LUKOIL is the latest oil firm that has said it plans to invest in Uganda’s petroleum industry, following China’s CNOOC and France’s Total, among others.
Kaliisa said the government was now evaluating Total and CNOOC, the two companies picked by Tullow Oil, as potential partners after it buys Heritage Oil’s 50 % stake in exploration areas 1 and 3A.
Tullow’s bid for Heritage’s assets got a major boost when Italy’s Eni SpA withdrew from the race. Total and CNOOC had been invited to pitch their plans for development to the government, Kaliisa said.
A decision on Tullow’s proposed purchase of Heritage’s assets will be made after the government scrutinizes the sale and purchase and joint operating agreements signed between Tullow, CNOOC and Total.
Uganda would earn $300 million to $400 million in capital gains taxes on Heritage’s sale of its stakes and a larger, but undetermined sum, from any transactions that might occur between Tullow, CNOOC and Total, Kaliisa said.
State Minister for Minerals, Peter Lokeris, had signaled that approval of the Heritage sale was imminent. But sources told Reuters it might take a month or more as the evaluation of Total and CNOOC’s proposals was moving slowly.
Kaliisa said government endorsement of any transactions would depend on a “criteria based on investment required, market capitalization of a company, operator experience, avoidance of monopoly situation and alignment with government strategy.”