February 16, 2011 / 10:57 AM / in 7 years

FACTBOX-Uganda's fledgling oil industry

KAMPALA, Feb 16 (Reuters) - Ugandans vote in national elections on Friday with veteran President Yoweri Museveni expected to face down a fierce challenge from perennial foe and former ally Kizza Besigye.

The east African country discovered commercial hydrocarbon deposits in the Albertine rift basin along the border with the Democratic Republic of Congo in 2006.

An impending petrodollar bonanza is expected to inject the impoverished country with renewed economic vitality.

Here are a few key facts about the country’s oil industry.

THE BASIN

* The Albertine basin, part of the western arm of the Great East African Rift System, is divided into 10 exploration blocks covering thousands of square kilometres.

* Tullow Oil is the lead explorer in the region and the only company with known reserves after it acquired stakes from Heritage Oil & Gas last year. Other companies prospecting in the basin include Dominion and Neptune Petroleum.

* Heritage, which co-owned stakes in blocks 1 and 3A, sold its interests for $1.45 billion to Tullow but a dispute continues between both companies and the government over whether the deal is subject to capital gains tax.

RESERVES

* The Ugandan government estimates reserves at 2 billion barrels but says they could be much higher.

So far the government has signed only five Production Sharing Agreements (PSAs) and the energy ministry says less than 20 percent of the entire basin has been explored.

* Five new exploration licenses will be offered this year after a crucial oil law to regulate the sector is passed.

The next licensing round will be based on competitive bidding and the government says it will demand tougher terms as past discoveries mean exploration is less risky.

* Tullow said in January it now anticipates commencing commercial petroleum production early next year, pushing its original target of the last quarter in 2010.

REFINERY

* Uganda has said it will construct a refinery as a public-private project to process its crude and says it needs about $2 billion to finance the facility.

Development will be phased and a feasibility study recommended a plan to start with modest refining capacity of 20,000 barrels per day rising to 150,000 barrels over a six-year period.

* Tullow is awaiting a government green light to sell stakes to France’s Total and China’s CNOOC to help mobilise $10 billion needed to fund the development phase.

DOUBLE-DIGIT GROWTH

* The Bank of Uganda (BoU) has said the petrodollar bonanza, if invested well, could propel the economy’s growth rates into double digits. Critics say an entrenched culture of corruption could see the oil wealth squandered.

* Last year, Museveni said he would personally sign every deal to stop corruption.

Anti-graft watchdogs say the move, along with the fact that his son is in charge of security for the oil fields, makes the first family “uncomfortably” close to the oil sector.

WHAT TO WATCH

* Who wins the election. If Museveni wins, investors, especially those already exploring in the country, will probably feel comfortable with the status quo.

If Besigye beats Museveni, however, it could arouse jitters because he is an unknown quantity. He has promised to review all existing PSAs if elected, but has not said whether he will rescind them.

* A disputed poll and an outbreak of violence. If the opposition thinks the poll was rigged and takes to the streets, violence could erupt.

If violence breaks out and the security forces do not quell it swiftly, the economy could be hit and investor interest in the sector could be sapped.

* Resurgence of rebel activity in western Uganda. If the poll is disputed and chaos ensues, a dormant rebel force that once operated around the oil fields, Allied Democratic Forces (ADF), could seek to exploit a possible security vacuum.

Reporting by Elias Biryabarema; editing by Giles Elgood

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