Uganda pins hopes on oil

"I hope it will make a big difference; if the oil is in our country, it should be cheaper," said fuel station attendant Patricia Mukiibi as she pumped thick, black petrol into a red motorbike.

As Uganda slowly emerges from two decades of civil conflict in the north, oil found in the west on the banks of Lake Albert is propelling the country into a new phase of its economic history.

"This is a very significant find," said Bryan Westwood, Uganda manager of Canada's Heritage Oil Corp.

Heritage operates two exploration blocks in partnership with UK-based Tullow Oil, which also runs three separate blocks. They have drilled seven wells, all of which yielded high-quality crude oil.

Mini-refineries

Ugandan President Yoweri Museveni pins high hopes on the resource he says will accelerate the country's development. Oil officials estimate there may be reserves of up to a billion barrels, mostly under Lake Albert.

Heritage found the equivalent of 14 000 barrels per day (bpd) in just one well off the lake shore and plans to drill six more wells next year. Tullow announced that it will begin oil production in early 2009.

The oil is lightweight and clean, but has a waxy texture. To export it, a pipeline would have to be heated to aid the flow. Current talks to regulate the sector are looking into options for transporting the precious commodity.

In the meantime, licensed companies are building a mini-refinery capable of delivering paraffin, diesel and jet A-1 fuel, but not petrol.

An output of 350 000 barrels is seen as a minimum to recoup the cost of a multi-billion pipeline but Westwood cautioned that full-flow production will not start for another five years. "We've only just scratched the surface."

Such production levels would remain modest compared with African heavyweights such as Nigeria or Angola but could still revolutionise the economy of a country where the gross national income per capita was $1 490 in 2006.

Managing wealth

Yet few countries have better exemplified the instability that can come with oil wealth than neighbouring Sudan, and Ugandan officials vow they will obviate the pitfalls of a hasty exploitation.

Energy Minister Daudi Migereko said a new gas and oil policy was being drafted to avoid corruption and mismanagement in the oil sector.

The minister added that the government had pledged to direct oil revenues toward human resources, electricity development and better roads in order to make it "cheaper" to do business in the country.

"In Uganda, oil will be not be a curse, but an asset," Migereko insisted.

Now that oil deposits have been confirmed, Uganda has frozen the attribution of new licenses in an attempt to drive a harder bargain with future bidders. It has also sought the help of a US consultancy to help develop the sector.

On the other side of Lake Albert, Heritage and Tullow signed an agreement with the government of the Democratic Republic of Congo to start exploration.

Uganda and the DRC - already plagued by multiple conflicts and a refugee crisis - have been embroiled in a dispute over Rukwanzi Island, a strategic drilling point in the middle of the lake.

Border commission

Heritage's oil discovery near the border last year only raised the stakes.

Museveni and Congolese President Joseph Kabila met in Arusha, Tanzania in September to settle differences. Aggrey Awori, a Ugandan Parliament member who was present at the negotiations, said the talks "were a major step forward".

"It has been established that in the event of a problem on the ground, senior military officers will be in communication, instead of one capital reacting to the other," Awori said.

"We're working on it (DRC-Uganda oil-sharing)," said Oryem Okello, Ugandan state minister for foreign affairs. A border commission, along with independent arbitrators, was agreed upon at the Arusha talks.

Heritage and Tullow are also waiting for clearance from Kabila to safely operate in eastern Congo. "We will keep drilling wells until we stop finding oil," Westwood said.

- AFP