Uganda, expected to become an oil producer next year, could be a significant supplier in future, an official from a company working in the African nation said on Tuesday.

British oil companies Heritage Oil and Tullow oil work in exploration projects in the Albert Basin, which is located in the west of Uganda close to the Congolese border.

In the last two to three years Uganda has been propelled to the centre stage for upstream oil in Africa, Brian Smith, Vice President of Exploration at Heritage Oil, said at a conference.

We have just scratched the surface of the country's oil potential.

Africa has been a hotspot for oil exploration and rising production in recent years, driven by countries such as Angola. But the prospect of oil riches has fuelled border tensions between Uganda and Congo.

Smith said there was a possible 2 billion barrels of oil in the Albert Basin but much of this would not be available until around 2015, although some production could be on stream by the first quarter of 2010.

Analysts also think Uganda has potential.

There has been 700 million barrels discovered in the basin, which is enough for a commercial development and there is definitely upside potential, said Christopher Brown, Sub-Saharan Africa analyst at Wood Mackenzie.

PIPELINE NEEDED

Heritage Oil says there have been 18 successful exploration and appraisal wells drilled in the basin since 2006, of which three tested at a production rate at over 12,000 barrels per day (bpd).

Development of the basin assumes building a crude export line to Mombasa on the east coast of Kenya at an estimated cost of $1.5-2.0 billion, with a capacity of 500,000 bpd.

There is potential for Tullow Oil to start very small scale production from next year but we wouldn't expect an export pipeline before 2014 or maybe later, Wood Mackenzie's Brown said.

In terms of quality, Brown said the oil in the basin was quite waxy, but of reasonably good quality. Waxy oil needs a heated pipeline, which leads to higher production costs.

Since mid-2007, tensions over the border between Uganda and the Democratic Republic of Congo that runs through Lake Albert have been mounting, threatening any potential oil production in the region.

Congo says Tullow Oil and Heritage Oil, with Ugandan concessions, are working illegally in its waters. Congo last year awarded prospecting rights claimed by Tullow to a rival consortium.

But Heritage said its plans would probably not be affected.

For a long time there have been tensions on the border, and yes we have had security problems but they are isolated incidents and I don't think it will greatly influence our plans, Smith said.

Uganda is a landlocked country in eastern Africa bordered by Kenya, Congo, Sudan, Tanzania and Rwanda and has a population of approximately 31 million. (Editing by Alex Lawler/James Jukwey)

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