From: Leo Odera Omolo
Date: Sun, Sep 27, 2009 at 3:03 AM

THE DETAILS OF UGANDA-TULLOW OIL DEALS ON REVENUE SHARING IS REVEALED WHILE THE IRISH COMPANY IS ALSO REPORTED TO BE IN NEGOTIATION WITH KINSHASA REGIME.

Business News By Leo Odera Omolo In Kisumu City.

DETAILS of oil deals has been revealed detailing how the Irish multinational oil firm will share out its revenue from the sales of oil with Ugandan government.

These details emerged in a report published today in the SUNDAY VISION. The Irish multinational oil company’s CEO Mr Aidan Heavey was quoted as saying that his firm is involved in tentative negotiations with the DR Congo government in Kinshasa, in a concerted effort to have all the oil drilling business on both sides of Lake Albert handled by Tullow Oil Company.

It says, Uganda secured one of the best deals in the world for its oil exploration. For every 10 barrels of crude oil the government of Uganda will be entitled to 8 eight per cent of the revenue accrued from the sales of oil.

Only one oil producing country in Sub-Saharan Africa, Angola, has a better term for her oil revenue than Uganda .

In Ghana, another oil producing country in the continent, the government only gets 6 per of the oil sales revenue, says the report, adding that Tullow oil, one of the biggest oil companies in Uganda, has so far invested close to USD 500 million { in Ugandan oil.

The deal is more remarkable as Uganda is a landlocked country. This implies that it will take the oil firm longer to get its money back than, for example in Ghana where the oil is produced in the sea and exported as crude oil.

According to Tullow Oil estimation, 800 million barrels of oil deposits have so far been confirmed in Uganda, but they are looking for a potential of two billion barrels.

“The area we are working in is 1,200 kilometers from a sea port. We have terms that are very much in favor of the government of Uganda. It is expensive to work with waxy crude oil. Yet we still pay 100 per cent of the costs”, says the Tullow’s CEO in an exclusive interview with the SUNDAY VISION.

“Of what we have discovered so far, the impact on Uganda would be about USD 2 billion {Ushs 4 trillion} a year in revenue for 20 to 30 years. The country now has an asset worth nearly USD 50 billion {Ushs 100 trillion}”, the CEO added.

In comparison, Uganda’s total budget for public expenditure this financial year is provisionally being estimated at Ushs 6.6 trillion. In addition, he reckons 100,000 jobs will be created as soon as oil production starts. It will be transformational to the whole area.

Asked if Uganda should refine its oil rather than export it as crude, Mr Heavey said a paper evaluation needed to be done on the need of Uganda and the region on what was financially ecpnpmical.

“The idea of Uganda having its own oil refinery makes absolutely common sense. The only issue is the size and type of the refinery required.”

“Tullow Oil have a culture of being very strict on environmental and social issues. It is very important that whoever is working on the other side of Lake Albert has the same culture,” said Mr Heavey.

He revealed that his company is currently negotiating with the Congolese government in Kinshasa to get the concession for the other side of the Lake Albert, arguing it would streamline the operation. “From an environmental point of view, the last thing you want is pollution in such beautiful area. If you have an oil in the lake it would be a disaster for the villagers”.

Mr Heavey noted in the report that enough oil had been discovered for Uganda to go it alone, but that it made more sense from a regional point of view to produce the oil from the DR Congo and South Sudan through one system ,adding that, “ it makes sense if you had a central hub for distribution in Uganda and have other countries linked to that central hub. That would be cost effective way of doing business. It would be a project that brings stability in the whole region”.

The Tullow CEO dismissed concerns by the NGOs that oil is a “curse” ,arguing that when oil was found in Africa about 40 years, there were few controls and regulations.

He added, “The contracts were in favor of the foreign multinational oil companies. There was little regulation in relation to transparency, environmental and social issues. Quite truly some of the things that happened in the past were a disgrace to the communities. The oil companies have a lot to answer for it”.

“The World”, he said, “has since then changed a lot. Today, oil companies have to be transparent. They have to consider environmental and social issues. The terms now are much in favor of the host governments. The system of regulations has changed dramatically”.

Tullow Oil, which is currently working in 16 African countries in Sub Saharan, he said, strives at making its two biggest investments in the continent, the example of how it should be done. “We are in two huge projects in Uganda and in Ghana. It is very important for us and our reputation that these prove to be the opposite of what people have”.

Ends

leooderaomolo@yahoo.com
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Subject: Details of Uganda-Tullow Oil Company revenue sharing is revealed