Source
http://allafrica.com/stories/200907020516.html
interview
Kampala — Tullow Oil has been exploring oil potential in the Lake Albertine Graben since 2001. Ibrahim Kasita and Els De Temmerman talked to Brian Glover, the business unit manager Uganda. Below are excerpts...
Question: How big is the oil discovery in Uganda? Some people are downplaying it, saying it is not viable while others say it is a huge find. What is the reality?
Answer: What has been discovered so far is about 700 million barrels. In terms of what we think could be there, one could safely say there are probably over a billion barrels in the Lake Albertine Graben region.
How would you compare it with other African countries?
Sudan has probably 1.6 billion barrels. Uganda's oil is comparable to Equatorial Guinea and Chad. It is, however, not like Nigeria or Saudi Arabia, as some papers reported recently. But it is important because it is the first major discovery in East Africa and it is in the centre of a huge market.
Is it smaller than Angola or Gabon?
It is much smaller than Angola. However, if we look at the entire Lake Albert region, from the South to the North, it has the ability to reach the scale of Gabon.
So what does it mean for Uganda?
When considering what it means for a country, we have to convert these barrels into production. One might safely consider production in the order of 150,000 barrels a day over a period of 15, 20 or even up to 25 years. In terms of comparison, I would put Uganda in the top 50 of oil producers in the world.
There is a big discussion about refining the oil here or exporting it as crude oil. What is the best option for the country?
This issue is under discussion with the Government. We have to start small and we have to start as early as we possibly can. From Tullow's perspective, we see the country's needs as priority number one. That means a refinery has to be taken into consideration because it is of paramount importance.
We have done some initial analysis which indicates that there is a big market in East Africa. That market could be big enough to start with 30,000 to 50,000 barrels a day. But with time that market may grow. If there is enough oil beyond that, we could consider oil for export.
How long will it take to put that oil to use?
For the power project, we have agreed with the Government to start as soon as possible. We are looking at starting next year with a 50MW power generation. The opportunity we are considering is a project that could use gas alongside oil. The next stage will be having a refinery. But that will take time.
Why?
We are a landlocked country and we have to import everything. This includes bringing in all the materials from Mombasa for fabricating the refinery and assembling it. Building a refinery that meets the requirements of breaking down the waxy crude oil we see in Uganda will be technically complex. Realistically, this may take two, three to four years. It cannot happen this year because some factors have to be taken into consideration.
Which factors?
There are different types of refineries, those that produce heavy-fuel oil, diesel, kerosene or aviation oil, and the Government has to decide which one and in what quantities of each category it wants. The price differs a lot from refinery to refinery depending on to what extent the oil is broken down to maximise the value of the products.
Does Tullow Oil have the capacity to build a refinery?
I need to point out this distinction. Tullow is an exploration and production company. We will find the oil, produce it and take the crude oil and gas where it is required. We are very happy in looking for partnerships and work with the Government, for example, in refining crude oil for power. But we are not a refining company, neither are we a company that builds pipelines.
Which partners are you talking to at the moment?
Again, let's make this clear. The Government has visited many countries around the world seeking for further knowledge about the oil industry and seeking an understanding on how best to manage this oil. As of now, there are no clear forerunners in terms of who will be the refining company. It is at very early stages.
There was at one point a plan to link an oil pipeline from Southern Sudan to Uganda. Is that plan still on the table?
No. There are no plans beyond Uganda's oil resource that I know of.
Why have there been delays in the power-generation project?
There has been a lot of discussion on where to build an early production system and we finally found a location outside the Kabwoya Game Reserve. Another reason for the delay is that we found a lot of oil elsewhere. We are looking at how to make the most use of the discovered oil in terms of scale. This requires carrying out an environmental impact assessment. Mputa oil fields, originally designed for the early production, are not the best choice because they are very small. With the discovery of more oil, we have more options to choose from.
Is the oil exploration not going to spoil Murchison National Park?
The two oil wells our partners of Heritage have completed are in the national park. One needs to be very conscious about the environment. There are very many beautiful places in the world where we have discovered oil and we have managed carefully to protect the environment. Any decision will have to look at environmental concerns.
How much oil do you need to have to make sure the refinery is profitable?
Between 30,000 and 50,000 barrels a day is not a problem. The cost effectiveness weighs against the scale of the market, which will continue to grow. Uganda currently needs 11,000 barrels a day.
Which option did other countries in Africa choose?
Sudan started with small topping plants in the north of the country and build pipelines linking them. Topping plants are very suitable for Uganda because they create mainly heavy fuel oil and no other petroleum products.
Which type of refinery does Uganda need?
Uganda's crude is waxy. It requires a certain type of refinery to break down the crude oil into various components. The quality of crude oil is good but it requires some procedures in order to break it down to get relevant products.
So the dilemma is between having something quickly but at low benefit, or waiting a little longer but having a product which is more profitable for the country?
Oil exploration is an unpredictable business. It changes all the time. We are advantaged here since we discovered oil in 23 out of 24 wells. This is unprecedented. Normally, only 20 to 25% of the places we drill in the world have oil. In Uganda, we still have a long way to go. We have covered only 30% of our oil exploration programme.
Is this all on shore or have you started drilling in Lake Albert?
The 23 are all on shore. In the last months, we have been drilling at the Ngassa-2 oil well from the shore horizontally into the lake, with a depth of 4,000 metres. This is the first time Tullow is drilling underneath the lake.
Is some of that oil shared with neighbouring Congo?
What we have discovered so far is clearly on Ugandan land territory. It is obvious that oil will also be found on the DRC side of the lake.
Are you talking to the Congolese authorities?
A couple of years ago, we entered into an agreement with the Congolese Government to give us a license to explore at the other side of the lake, in the DRC. We are hoping to conclude soon. They have given us an indication that we will be allowed to operate on the other side.
In terms of employment, is the oil business going to provide a lot of jobs to Ugandans?
We are in an early stage and I expect the number of employees to go up. But for our company, about 75% of our employees are Ugandans. Overall, the industry will employ about 150,000 employees. Tullow is expected to take on about 10, 000 people. Some of them will be technical people and these will require serious training. Others will be doing simple jobs, such as truck drivers. Don't forget that an industry like oil requires many services like health, safety and finance.
But why is it that you have refused to disclose the Production Sharing Agreement and Revenue Sharing Agreement?
We signed a non-disclosure agreement with the Government. As a contractor, we are not allowed to provide any information regarding this agreement. Since no legislation has been enacted yet, many components have not been finalized. If this is done, information will be available. As I said, production has not yet started and no revenue has been generated to date.
Being an expert in this field, which countries do you know have the capacity and expertise to build the kind of refinery Uganda needs?
There are many countries in the world, such as the US, China and Denmark. India also has significant refineries with good qualities. I would not count Iran in that category.
How much more do you get from refined oil than crude oil?
You need to first understand how much it costs to bring the components to generate products from the crude oil, and how much it costs to export crude oil from a thousand kilometers away.
Why has it taken to find this oil in Uganda?
A company back in the 1930s discovered oil in the Albertine Rift Graben. At the time it wasn't considered insignificant. They were looking for significant finds such as in Nigeria and Saudi-Arabia. But the world has moved on. Now is the time when oil has become scarce and the prices have gone up. So countries like Uganda now come into consideration.
Lack of transparency may lead to sabotage like in Nigeria. What is your policy towards transparency and accountability?
We very much believe in transparency. It is good for our brand. We see no benefit in hiding things. Even in Uganda, we are always keen to have people visit our operations. There are certain countries we could not work in because of human rights issues and environmental concerns.
So it is not true that you are against the refinery because it does not give you return on investment in the short term?
It is not true. We always look at Uganda's needs first and foremost and balance it with the shareholders' interest.
http://allafrica.com/stories/200907020516.html
interview
Kampala — Tullow Oil has been exploring oil potential in the Lake Albertine Graben since 2001. Ibrahim Kasita and Els De Temmerman talked to Brian Glover, the business unit manager Uganda. Below are excerpts...
Question: How big is the oil discovery in Uganda? Some people are downplaying it, saying it is not viable while others say it is a huge find. What is the reality?
Answer: What has been discovered so far is about 700 million barrels. In terms of what we think could be there, one could safely say there are probably over a billion barrels in the Lake Albertine Graben region.
How would you compare it with other African countries?
Sudan has probably 1.6 billion barrels. Uganda's oil is comparable to Equatorial Guinea and Chad. It is, however, not like Nigeria or Saudi Arabia, as some papers reported recently. But it is important because it is the first major discovery in East Africa and it is in the centre of a huge market.
Is it smaller than Angola or Gabon?
It is much smaller than Angola. However, if we look at the entire Lake Albert region, from the South to the North, it has the ability to reach the scale of Gabon.
So what does it mean for Uganda?
When considering what it means for a country, we have to convert these barrels into production. One might safely consider production in the order of 150,000 barrels a day over a period of 15, 20 or even up to 25 years. In terms of comparison, I would put Uganda in the top 50 of oil producers in the world.
There is a big discussion about refining the oil here or exporting it as crude oil. What is the best option for the country?
This issue is under discussion with the Government. We have to start small and we have to start as early as we possibly can. From Tullow's perspective, we see the country's needs as priority number one. That means a refinery has to be taken into consideration because it is of paramount importance.
We have done some initial analysis which indicates that there is a big market in East Africa. That market could be big enough to start with 30,000 to 50,000 barrels a day. But with time that market may grow. If there is enough oil beyond that, we could consider oil for export.
How long will it take to put that oil to use?
For the power project, we have agreed with the Government to start as soon as possible. We are looking at starting next year with a 50MW power generation. The opportunity we are considering is a project that could use gas alongside oil. The next stage will be having a refinery. But that will take time.
Why?
We are a landlocked country and we have to import everything. This includes bringing in all the materials from Mombasa for fabricating the refinery and assembling it. Building a refinery that meets the requirements of breaking down the waxy crude oil we see in Uganda will be technically complex. Realistically, this may take two, three to four years. It cannot happen this year because some factors have to be taken into consideration.
Which factors?
There are different types of refineries, those that produce heavy-fuel oil, diesel, kerosene or aviation oil, and the Government has to decide which one and in what quantities of each category it wants. The price differs a lot from refinery to refinery depending on to what extent the oil is broken down to maximise the value of the products.
Does Tullow Oil have the capacity to build a refinery?
I need to point out this distinction. Tullow is an exploration and production company. We will find the oil, produce it and take the crude oil and gas where it is required. We are very happy in looking for partnerships and work with the Government, for example, in refining crude oil for power. But we are not a refining company, neither are we a company that builds pipelines.
Which partners are you talking to at the moment?
Again, let's make this clear. The Government has visited many countries around the world seeking for further knowledge about the oil industry and seeking an understanding on how best to manage this oil. As of now, there are no clear forerunners in terms of who will be the refining company. It is at very early stages.
There was at one point a plan to link an oil pipeline from Southern Sudan to Uganda. Is that plan still on the table?
No. There are no plans beyond Uganda's oil resource that I know of.
Why have there been delays in the power-generation project?
There has been a lot of discussion on where to build an early production system and we finally found a location outside the Kabwoya Game Reserve. Another reason for the delay is that we found a lot of oil elsewhere. We are looking at how to make the most use of the discovered oil in terms of scale. This requires carrying out an environmental impact assessment. Mputa oil fields, originally designed for the early production, are not the best choice because they are very small. With the discovery of more oil, we have more options to choose from.
Is the oil exploration not going to spoil Murchison National Park?
The two oil wells our partners of Heritage have completed are in the national park. One needs to be very conscious about the environment. There are very many beautiful places in the world where we have discovered oil and we have managed carefully to protect the environment. Any decision will have to look at environmental concerns.
How much oil do you need to have to make sure the refinery is profitable?
Between 30,000 and 50,000 barrels a day is not a problem. The cost effectiveness weighs against the scale of the market, which will continue to grow. Uganda currently needs 11,000 barrels a day.
Which option did other countries in Africa choose?
Sudan started with small topping plants in the north of the country and build pipelines linking them. Topping plants are very suitable for Uganda because they create mainly heavy fuel oil and no other petroleum products.
Which type of refinery does Uganda need?
Uganda's crude is waxy. It requires a certain type of refinery to break down the crude oil into various components. The quality of crude oil is good but it requires some procedures in order to break it down to get relevant products.
So the dilemma is between having something quickly but at low benefit, or waiting a little longer but having a product which is more profitable for the country?
Oil exploration is an unpredictable business. It changes all the time. We are advantaged here since we discovered oil in 23 out of 24 wells. This is unprecedented. Normally, only 20 to 25% of the places we drill in the world have oil. In Uganda, we still have a long way to go. We have covered only 30% of our oil exploration programme.
Is this all on shore or have you started drilling in Lake Albert?
The 23 are all on shore. In the last months, we have been drilling at the Ngassa-2 oil well from the shore horizontally into the lake, with a depth of 4,000 metres. This is the first time Tullow is drilling underneath the lake.
Is some of that oil shared with neighbouring Congo?
What we have discovered so far is clearly on Ugandan land territory. It is obvious that oil will also be found on the DRC side of the lake.
Are you talking to the Congolese authorities?
A couple of years ago, we entered into an agreement with the Congolese Government to give us a license to explore at the other side of the lake, in the DRC. We are hoping to conclude soon. They have given us an indication that we will be allowed to operate on the other side.
In terms of employment, is the oil business going to provide a lot of jobs to Ugandans?
We are in an early stage and I expect the number of employees to go up. But for our company, about 75% of our employees are Ugandans. Overall, the industry will employ about 150,000 employees. Tullow is expected to take on about 10, 000 people. Some of them will be technical people and these will require serious training. Others will be doing simple jobs, such as truck drivers. Don't forget that an industry like oil requires many services like health, safety and finance.
But why is it that you have refused to disclose the Production Sharing Agreement and Revenue Sharing Agreement?
We signed a non-disclosure agreement with the Government. As a contractor, we are not allowed to provide any information regarding this agreement. Since no legislation has been enacted yet, many components have not been finalized. If this is done, information will be available. As I said, production has not yet started and no revenue has been generated to date.
Being an expert in this field, which countries do you know have the capacity and expertise to build the kind of refinery Uganda needs?
There are many countries in the world, such as the US, China and Denmark. India also has significant refineries with good qualities. I would not count Iran in that category.
How much more do you get from refined oil than crude oil?
You need to first understand how much it costs to bring the components to generate products from the crude oil, and how much it costs to export crude oil from a thousand kilometers away.
Why has it taken to find this oil in Uganda?
A company back in the 1930s discovered oil in the Albertine Rift Graben. At the time it wasn't considered insignificant. They were looking for significant finds such as in Nigeria and Saudi-Arabia. But the world has moved on. Now is the time when oil has become scarce and the prices have gone up. So countries like Uganda now come into consideration.
Lack of transparency may lead to sabotage like in Nigeria. What is your policy towards transparency and accountability?
We very much believe in transparency. It is good for our brand. We see no benefit in hiding things. Even in Uganda, we are always keen to have people visit our operations. There are certain countries we could not work in because of human rights issues and environmental concerns.
So it is not true that you are against the refinery because it does not give you return on investment in the short term?
It is not true. We always look at Uganda's needs first and foremost and balance it with the shareholders' interest.
