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The Ugandan government on Wednesday issued its first ever oil production license to China National Offshore Oil Corporation (CNOOC).

Peter Lokeris, state minister for energy, told a joint press conference with CNOOC that production is expected to start in 2017.

"It is an achievement for the oil and gas sector and the country at large that the efforts curved out under the tenure of the exploration licenses in the country are now maturing into development phase of the petroleum value chain and progressing towards production," he said.

"CNOOC Uganda Limited is grateful that the government of Uganda has approved the field development plan and the petroleum resolve report of King Fisher, which in fact ushers in the phase of field development and indeed the planned key milestone for the development of King Fisher oil field," said Jin Weigen, vice president of CNOOC Uganda.

CNOOC will have to invest over two billion U.S. dollars in the production process, including a 50-km oil pipeline from Kingfisher well to Kabale, the site for the proposed oil refinery.

Although the Kingfisher well located in western Uganda is estimated to have over 630 million barrels of oil, experts say only 190 million barrels of that oil is recoverable. The recovery rate will be about 31 percent, slightly above the internationally known 30 percent, according to ministry of energy officials.

After completion, the Kingfisher well will produce between 30, 000 to 40,000 barrels of oil per day.

Uganda's discovered oil deposits total to 3.5 billion barrels of oil.

Commercial production is expected to start in 2017 with the refinery producing a maximum of over 60,000 barrels of oil per day. The country will also export some of the crude oil that will be produced.