China Secures New Oil Production Deal In Uganda As It Continues To Cast Wide Net For Resources

Uganda has granted China a license to develop the nation's oil reserves in a move that secures the world's second-largest economy yet another energy source and promises to add a new export component to one of the world's poorest countries, a Ugandan news publication, The Independent reported Thursday.

China National Offshore Oil Corp., CNOOC Limited (NYSE:CEO), won the $2 billion production license to tap into reserves discovered seven years ago in the Kingfisher Area in the Albertine region over the next four years, Ugandan Energy Minister Peter Lokeris said Wednesday.

China has been stepping up its presence in Africa as it hopes to bring the continent into its sphere of influence by developing infrastructure, creating public works projects and providing military aid.

In Uganda, the area being developed holds 635 million barrels of oil, of which 196 million are recoverable.

In addition, Uganda is looking to construct a 31-mile oil pipeline as well as a refinery expected to produce 60,000 barrels of refined oil per day, the energy minister said.

The initial field when developed will produce between 30,000 to 40,000 barrels of oil per day, and the rate is expected to improve after further development.

While Uganda may be one of the world's poorest nations, with very limited resources, it is nevertheless committed to protecting its environment. The landlocked East African nation has made environmental protection a key goal, guided by the National Environment Policy the Ugandan government adopted in 1994.

The government has called for an environmental and social impact assessment of the drilling, production operations and different project stages, including construction, Lokeris said.