The Ugandan government issued its first ever oil production license Wednesday, with an award to the China National Offshore Oil Corporation (CNOOC).
Production in the Kingfisher oil field is expected to start in 2017, according to Peter Lokeris, state minister for energy.
The development plan for the long-disputed King Fisher oil field calls for CNOOC to invest over $2 billion.
Included are 40 development wells — with 27 producers and 13 for injection, Lokeris said.
In 2010, Uganda repossessed Kingfisher from Tullow Oil plc when the exploration license for area 3A of the Lake Albert basin expired.
Kingfisher, located in western Uganda, is estimated to have over 630 million barrels of oil.
Only 190 million barrels is thought to be recoverable, according to ministry of energy officials.
CNOOC’s plans include a 50-km oil pipeline from Kingfisher well to Kabale, the site for a proposed oil refinery.
After completion, the Kingfisher development is expected to produce between 30, 000 to 40,000 barrels of oil per day.
Uganda’s total discovered oil deposits stand at 3.5 billion barrels of oil.
The Kingfisher-associated refinery has a planned capacity of about 60,000 barrels of oil per day.
Plans also call for Uganda to export some of the crude oil that will be produced.
Oil was discovered in Kingfisher in 2004.
Tullow Oil plc drilled more than 50 exploration wells in Uganda.
In 2010, its exploration license for Kingfisher expired.
Uganda claimed Tullow and its former joint venture partner, Heritage, “were supposed to apply for a production license, which they did not,” an official told Dow Jones Newswires at the time.
Tullow had acquired Heritage’s interests in the field for $1.45 billion.
Heritage refused to pay Uganda’s 30% capital gains tax on the sale, so Uganda didn’t approve the transaction.
The unresolved $405 million tax dispute led to no production license being issued.
Uganda repossessed Kingfisher in August 2010.