Tullow, Partners Lose Control of Ugandan Oil Field
Repossession Is Latest in Ongoing Tensions Between Government and Oil Companies
KAMPALA, Uganda—Uganda has taken back control of the Ngasa oil discovery from U.K.-based Tullow Oil TLW.LN -0.78% PLC, China's Cnooc Ltd. 0883.HK +1.08% and France's Total SA FP.FR -1.13% after declining to renew its appraisal license, the energy and minerals development ministry said Tuesday.
The ministry said in a statement that although Tullow struck oil and gas at the field around 2008, the company didn't conduct further appraisal activities to establish the exact size of the reserves. Company officials said that the field's complex geology presented challenges for further drilling, forcing Tullow to halt operations.
The repossession is the latest in a series of spats—which are widely blamed for delaying the commercialization of Uganda's 3.5 billion barrels of crude reserves—between government and oil companies.
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"The time provided to complete the appraisal work on this field expired and no further extension for appraisal was given by government," the state-run petroleum exploration and production department said in a statement. "This discovery area will be considered for inclusion in the areas to be licensed in future."
A spokesman for Tullow said the company suspended the field, which extends beneath Lake Albert, because its development had become uneconomic.
Angelo Izama, an oil analyst with Ugandan-based think tank Fanaka Kwawote said that the development shows how Ugandan oil fields in environmentally sensitive locations are beginning to pose challenges to developers.
"It's a clear testimony that going forward, some Ugandan oil fields will require sophisticated technology as well as more resources to develop," Mr. Izama said.
Although the majority of the current Ugandan discoveries are onshore, some crude deposits extend beneath Lake Albert, which lies along the western border with Congo.
The Ngasa oil field becomes the second oil prospect to be repossessed by the government in less than two years, as Tullow, Total and Cnooc continue efforts to start crude production. The companies say they will spend more than $10 billion to develop Ugandan oil projects by 2017.
Uganda discovered commercial oil reserves in 2006, but production has been delayed by protracted talks over development plans and refining options.
Tullow said in February that it is considering selling part of its stake in Uganda to focus on Kenya.