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Uganda: Export Pipeline Is The Bankable Asset

You can’t finance an oil development on a refinery, Tullow says.

Tullow Oil has spoken up on the option it prefers between constructing an export pipeline and a refinery for Ugandan crude. “The pipeline is key for Uganda to be number one in the queue for finance”, Aidan Heavey, the company’s founder and CEO, told the Ugandan Chamber of Mines & Petroleum.

“You can have both. But you cannot have an oil industry without a pipeline”, Heavey told the UCMP Journal. “It just doesn’t work. …… If you are developing oil fields like the ones in the Lake Albert region, it is going to cost the oil companies about $12-14bn to develop the region. It might take 20 years to get that money back. This is a huge investment for a long period of time. If there is no market for the oil, they can’t finance it. If you have a pipeline, you can take the oil to the shore, put it on the ships and sell it so that you get your money back. But if you only have a refinery, you have to say how much oil can we sell to the refinery? Are we guaranteed that we are going to get it every day for the next 25 years? Who is going to guarantee it? Is government going to guarantee it? So you can’t finance an oil development on a refinery. A refinery is only an offshoot of a major development plan, which is the pipeline”.

Mr Heavey, an accountant by training, explained that the reason as to why countries want to develop oil quickly is because technology is changing quickly. “There is a possibility that in five or six years’ time somebody can invent some gadget where someone doesn’t need fuel in the car. If that happens, the oil loses value, What you need to do is to get the oil out of the ground as quickly as possible and invest it in infrastructure, industry, and other things that are long term which will sustain generations to come for a long period of time because technology will change”

He allowed that the refinery was down to the government’s decision and that is what the government wants. “If government wants a refinery, then that is something that we the operators  have to help government achieve…but you have to have a pipeline”.

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1 comment

  1. It’s fantastic that you are getting ideas from this article as well as from our dialogue made at this place.

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