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KAMPALA, Uganda (Dow Jones)--The recent oil discovery in Amuru district, northern Uganda, is likely to stall a planned 40,000-hectare sugar project there, a lawmaker said Wednesday.
"They have to keep off the land now that oil has been discovered there," said Livingstone Okello-Okello, who is also chairman of a northern Uganda parliamentary group.
He added that the government is expected to reverse the decision to allocate the land to Madhvani Group for sugar cane growing.
Canada-based Heritage Oil Corp.(HOT) announced earlier this month that it had made the largest oil find in Uganda in Amuru district. The oil discovery in block 1 at Giraffe exploration well 1 is "world-class", said Heritage which owns the block jointly with U.K.-based Tullow Oil PLC (TQW.DB)
However, in December, the Ugandan government ordered the land board of Amuru district to allocate 40,000 hectares of land to Madhvani which is planning to set up a 60,000 metric-ton-a-year sugar plant to boost output for both local and regional markets.
Madhvani already owns Kakira Sugar Works Ltd., Uganda's leading sugar producer. The company declined to comment on the development.
An official with the ministry of trade and industry told Dow Jones Newswires that it's more likely that land in another district will be allocated to the sugar producer. However, he added that no decision been made.
Uganda's three leading sugar producing companies are in a drive to expand farmlands and mills in to increase annual sugar production to 350,000 tons by 2010 from the current 200,000 tons. But expansion efforts are being derailed by lack of land blamed mainly on poor land laws and policies.
-By Nicholas Bariyo, contributing to Dow Jones Newswires; +256-75-2624615; This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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