Uganda ties up rasping crude oil issue
Tullow hopes to supply oil to power plants in Uganda, a move the government hopes will help cut power tariffs
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East Africa’s third largest economy struck commercial hydrocarbon deposits in 2006 in the Lake Albert Basin and reserves, estimates at two billion barrels, have ignited a surge in foreign investor interest in the budding petroleum sector.
Brian Glover, Tullow Oil’s country manager for Uganda, told reporters the company will supply crude from their well testing operations. Tullow owns half of blocks 1 and 3A in Uganda and also owns block 2 outright.
“We are in discussion with several potential buyers, including industry and power plants, the latter of which includes the new power plant to be built by Jacobsen (Elektro) in the Hoima district,” he said.
“We hope to be supplying crude from extended well testing in the next couple of months.”
Uganda has three thermal power plants that generate about 200 megawatts (MW), mainly from heavy fuel oil imported via the Kenyan port of Mombasa.
Glover said the company would begin with “hundreds of barrels a day” and scale up the supplies gradually. “By the end of 2011 we will have the capacity to produce higher rates and provide a wide range of potential customers,” he said.
Lower power tariffs
Minister of State for Energy Simon D’Ujanga told reporters the government wanted to minimise crude and gas flaring in oil fields to limit the environmental impact of petroleum exploration and production activity.
“We’ve told Tullow that instead of flaring the crude during well testing, let them instead supply it to the power producers and I think that’s what they’re going to do,” he said.
He said the power plants were expected to lower tariffs once they started purchasing crude locally. High transportation costs for imported fuel have been cited by power generators as the principal cause for Uganda’s high power prices.
“What is certain is that Tullow’s supply of crude to the power generators will impact the country’s power tariffs, but to what extent I can’t tell for now,” D’Ujanga said.
Uganda expects its electricity supply to grow by eight percent this year on the back of generation capacity from a number of mini-hydro power stations which are due to come online.
The Bujagali hydropower dam, whose 250 MW capacity is expected effectively to plug the country’s power deficit, is due to be completed in 2012.
