Ugandan passes landmark oil law clearing way for refinery

Uganda's parliament passed the second of three oil laws aimed at tightening regulation of the nascent hydrocarbons industry and providing a legal framework for development of an oil refinery.

Uganda discovered oil in 2006 near its border with Democratic Republic of Congo (DRC). Efforts to exploit the 3.5 billion barrels of estimated reserves have proceeded fitfully, beset by disputes over taxes and development plans.

UK explorer Tullow Oil and its partners France's Total and China's state-owned CNOOC are awaiting government approval of their field development plans to start setting up production infrastructure.

The new law passed late on Thursday - The Oil (Refining, Gas Processing and Conversion, Transportation and Storage) Bill, 2012 - will regulate the installation and operation of oil and gas processing infrastructure and marketing of final products.

Parliament in December passed the first of the three bills, which were initially introduced to the House early last year and drew criticism from the opposition and transparency activists, who said the executive was being given excessive powers.

"Parliament passed the second law yesterday and this time we didn't face much resistance," Kwizera Eddie Wa Gahungu, vice chairman of the House's natural resources committee, said on Friday.

Among other infrastructure projects, the new bill deals with a refinery Uganda wants to construct to process its crude.

Although the government had already secured land for the project, construction was awaiting the necessary legislation.

"We have been receiving a lot of interest from prospective investors in the project but we couldn't start on any negotiations because there was no legal framework," junior energy minister Peter Lokeris told Reuters.

"Now we'll proceed very fast on that project and I think as soon as the President assents to it we'll start negotiations with prospective investors."

Ugandan government officials have said in the past the East African country aims to have a 40 percent stake in the planned refinery with remaining shares reserved for a private investor.

The facility is expected to cost an estimated $2 billion.

Under the new law a licence granted to operate an oil refinery will initially be valid for 15 years but may be renewed for a period of five years at a time.

Lokeris said passing of the second oil law would also further tighten the regulatory environment ahead of a new licensing round in which 13 blocks are at stake.

At the end of 2011 the House imposed a moratorium on granting of new oil exploration licenses until all necessary laws have been passed.

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