France's Total SA is set to retain a major oil license in the northern section of Uganda's oil-rich Lake Albertine Rift basin, after striking a new oil discovery following months of extensive drilling activities, company and government officials have said.
The development is a major boost for the prospects of the company's operations in Uganda, where the exploration license for the block, known as 1A, where the discovery was made was due to expire next month.
Honey Malinga, the assistant commissioner at Uganda's state-run Petroleum Exploration and Production Department, told Dow Jones Newswires that the discovery would also boost the size of the country's crude reserves, currently estimated at 3.5 billion barrels.
"Total will automatically retain the license, we have asked them to apply for an appraisal and production license for the block," Mr. Malinga said.
Company spokesman Florent Segura told Dow Jones Newswires that the discovery requires further appraisal to determine its potential.
"Total confirms the discovery of hydrocarbons during the drilling of the exploration well Lyec-1 (in block 1A)," Mr. Segura said in an emailed statement. "Given that the license comes to an end on the next 3rd of February (2013)...we have asked the authorities to renew the license so that we can continue our exploration program."
Details about the size of the discovery are expected in the next few weeks.
Uganda is set to join Nigeria, Angola and Sudan among sub-Saharan Africa's major crude producers after a series of huge oil discoveries along its western border with Congo.
Total co-owns the license with China's Cnooc Ltd. and U.K.-listed Tullow Oil Plc.
According to Mr. Malinga, Total had drilled three dry wells in the block before striking oil in the fourth late last month. The license would have reverted to the government if the company had failed to discover oil before Feb. 3.
Total said early last year that it would spend $300 million on exploration and appraisal programs in Uganda.
In October, Uganda took back control of another oil block, Kanywataba, from the three joint-venture partners after their exploration license expired before a discovery.
Tullow had controlled the entire oil acreage comprising three oil blocks in the Lake Albert area until February last year, when the government finally approved a long-delayed $2.9 billion deal to split the oil licenses with Cnooc and Total.
Total operates blocks 1 and 1A located in the northern section of the rift basin, Tullow operates block 2, which straddles Uganda's Hoima and Bulisa districts, and Cnooc operates the Kingfisher oil fields located at the southern tip of Lake Albert.
The three companies are expected to invest around $10 billion-$12 billion to develop the oil fields, but they remain embroiled in a spat with the government over the fields' development plans and refining options, which continue to push back the planned start of production.
While the companies want to sell crude on the open market, Uganda insists that most of the oil be refined locally into fuel products, initially for domestic consumption and then for regional markets.
Total said last year that it expects to start Uganda oil output in 2017, a year later than previous projection.