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Tullow delays planned €10bn Ugandan investment

TULLOW Oil has said it will delay a €10bn investment in Uganda until next year due to the complexity of the company's operations in the east African country.

The largest Irish company on the Dublin stock exchange had planned to begin production in the final quarter of this year, but a long-running dispute with both the government there and Tullow's former partner, Heritage Oil, appears to have delayed that target.

Tullow is the largest exploration company operating in Uganda's Lake Albert basin, which is estimated to contain roughly 2.5bn barrels of oil.

A US diplomatic cable from December 2009 -- which was released in the WikiLeaks reports -- details an alleged conversation between a US diplomat and a Tullow executive.

The latter is alleged to have said that the company's Italian rival ENI was trying to pull off a "corrupt back-door deal" to gain a 50pc stake in the basin by bribing Ugandan officials.

Tullow denies the details of the conversation.

"Let's just be aware of the fact that oil production will have started after a very short period of time after the oil will have been first discovered," Tullow Uganda's manager Brian Glover told reporters yesterday.

"Exactly when that's going to be, we'll have to look very carefully, but I think 2012 is a good time," he said.

Mr Glover added that plans to meet the earlier target were "quite challenging".

Tullow paid about $1.5bn (€1.16bn) in July to Heritage Oil for its interests in the Lake Albert basin. However, Uganda has delayed final approval on the purchase of the stakes, saying it is owed $404m in capital gains tax from the transaction.

Tullow's investment in the country will increase to about $10bn over the next decade, making it the region's biggest investment project, according to Mr Glover. The company has spent $800m so far.

He added that Tullow had explored 37 wells in the country, of which 36 were found to be viable. It discovered 1bn barrels of recoverable oil, with another 1.5bn yet to be found.

Uganda's oil reserves may place it among the top 10 African producers and 50 biggest producers in the world, it says.

The company wants to bring in China National Offshore Oil and Total as partners to develop the country's oil industry.

A refinery planned by Tullow has the potential to reach production of 200,000 barrels of oil per day, Mr Glover added. (Additional reporting Reuters and Bloomberg)

Irish Independent