CNOOC in talks with the African nation on joint investment

BEIJING - China National Offshore Oil Corp, the country's biggest marine oil producer, is negotiating with Uganda to participate in the African country's first refinery, which will be adjacent to the Lake Albert Basin.

CNOOC, together with the British oil firm Tullow Oil PLC and Total SA of France, will invest in the project, which has a total projected cost of $1.5 billion, Elly Karuhanga, chairman of the Uganda Chambers of Mines and Petroleum, told China Daily on Wednesday.

He said the parties were still discussing the division of the investment.

The refinery, which is expected to start operations by 2015, is being built in conjunction with exploration of the basin, which will supply much of its oil.

The three companies investing in the refinery will have a one-third interest in each of the basin's three blocks.

CNOOC said on Tuesday evening that it had completed the long-awaited $1.47 billion acquisition, almost a year after it signed the sale agreements in March 2011, as disputes on the production-sharing agreements had caused delays.

CNOOC will operate Block 3A, while Tullow will operate Block 2 and Total will operate Block 1, according to CNOOC's statement.

Tullow said on Tuesday that early production at the three blocks was expected to start in 2013 before entering into a major production phase by 2016.

The development of the Lake Albert Basin will cost $10 billion and have more than 200,000 barrels of daily production eventually, according to estimates.

"At this point, the project partners are still at an early stage of looking into the basin's broad development scenarios, including separate potential refining and an export pipeline project," CNOOC said via email.

Most of the refinery's crude oil will be supplied by the basin, Karuhanga said, adding that part of the refinery's output would be sold to Uganda's neighbors.

The rest would be piped to a port in Mombasa, Kenya, for export, and China will be among the biggest buyers.

Ugandan Energy Minister Irene Muloni said in early February that Tullow had agreed with Uganda to establish a refinery in the country to supply the country and its neighbors.

The project is to be developed in three phases and is expected to reach a peak refining capacity of up to 200,000 barrels a day.

The African country has no refinery at present and must import oil products.

Uganda will establish a separate oil bureau and a national oil company to regulate and stimulate the oil industry, said Simon P.A. Ajiku, counselor of the nation's embassy in China.

China Daily