Uganda’s Oil and Gas Sector is rebounding with increased and broader opportunities for the country
As stated by Benjamin Franklin, one of the founding fathers of the United States of America, “investment in Knowledge pays the best interest”. The Petroleum Authority of Uganda (PAU) is delighted to partner with the New Vision Printing and Publishing Corporation to publish a weekly pullout on the oil and gas sector in Uganda. This pull out, which will run every Tuesday during 2018, will represent the PAU’s contribution to building knowledge, especially among Ugandans, through increased and regular sharing of information on the sector. This effort, which is also in fulfillment of the Petroleum Exploration, Development Act 2013, should enable more informed participation in, and inclusive development of the sector.
It is now clear that the oil and gas sector in Uganda is entering a phase of increasing, and broader opportunities, as it transitions from having only exploration, to having new exploration, preparation of the already discovered oil fields for production (development), and putting in place infrastructure for both commercialization of the discovered oil and gas resources, and facilitating the developments in the sector. The infrastructure for commercializing the discovered oil and gas resources includes the facilities in the oil fields, pipelines and the refinery while that for facilitating the developments in the sector includes, oil roads, an industrial park and the new international airport being built in Kabaale, Hoima District.
The signs of the sector’s expansion are, among other things, the increasing level of activity in the country in general, but especially in the Albertine Graben where oil and gas resources were discovered, laying of foundation stones for key infrastructures like the crude oil export pipeline, the numerous high profile international business delegations visiting the country to explore areas of partnership and investment, and the high value contracts for provision of goods and services in the sector which are regularly advertised in the media.
The institutional and legislative framework for the sector, is in place with the Ministry of Energy and Mineral Development (MEMD), the Petroleum Authority of Uganda and the Uganda National Oil Company (UNOC) as the vanguard institutions responsible for the development of the sector on behalf of the State. The roles of these three institutions are well defined, with the MEMD being responsible for policy, licensing and investment promotion in the sector and the PAU responsible for monitoring and regulating the exploration, development and production, together with the refining, gas conversion, transportation and storage of petroleum in the country. The roles of the PAU, also include, ensuring that petroleum operations in the country are carried out in accordance with the relevant laws, regulations, guidelines and in line with international best practice for the petroleum industry. UNOC on the other hand is responsible for the Government’s commercial interests in the sector including the Governments’ share in exploration, production, refining, transportation and storage.
Other Ministries, Departments and Agencies of Government also play crucial roles, and in this regard, the relationships between the oil and gas sector and the sectors of land use planning, environment, tourism, agriculture, finance and taxation, education and security among others, are becoming much more complimentary. An example is the relationship between the oil and gas and tourism sectors, where over 80% of the oil roads being developed in the country are also tourism roads, and where a continuous stream of the thousands of visitors, who are expected to come into the country to participate in, or support, the oil and gas developments during the next 3-5 years of heightened activities, will contribute to the growth of the hospitality industry. These are low hanging fruits for the tourism sector in the same way as a second international airport is for the country’s aviation/transport sector.
In the private sector, the key investors are the five oil companies which are currently licensed to undertake petroleum exploration, development and production. These are Armour Group from Australia, China National Offshore Oil Corporation (CNOOC) from China, Oranto Petroleum from Nigeria, Total E&P from France and Tullow Oil from the United Kingdom. These, together with the different goods and services providers whom they contract from within and outside Uganda, represent the key private sector players in the country’s oil and gas sector.
The PAU has been operational since October 2015 when its Board of Directors was inaugurated by His Excellency the President. The PAU is therefore a new institution, which is being set up at the same time as it implements its already existing mandate. The Vision of the PAU is; “To be a Leading Petroleum Regulatory Agency” and as part of the effort to realize this vision, the Authority is taking advantage of the long and well-established relationship between Uganda and Norway in the petroleum sector, to establish a strong relationship with the Norwegian Petroleum Directorate, the institution which regulates the petroleum sector in Norway. The PAU is also establishing relationships with the Alberta Energy Regulator of Canada, and the Department of Mines and Petroleum of Western Australia. Working with these institutions, which have long and well established best practices in regulating the petroleum sector should contribute to the PAU’s early achievement of its stated vision.
The PAU is also working to establish a working relationship with Tanzania’s Energy Water and Utility Regulatory Agency (EWURA), especially to facilitate fast tracking of the construction of the East African Crude Oil Pipeline (EACOP).
Key Activities Regulated
In the short term, the PAU will be monitoring and regulating the following key activities:
- New exploration work to be undertaken by Armour Group, in the Kanywataba Exploration Area in Ntoroko District and in the two stratigraphic/ vertical licenses in the Ngassa Exploration Area in Hoima District which are licensed to Oranto Petroleum Limited. The work to be undertaken in these Exploration Areas includes reprocessing the existing seismic data, acquiring new seismic data, undertaking geological and geophysical studies as well as feasibility studies and drilling of at least two exploration wells.
- Preparation of the already discovered oil fields for production (development), will be undertaken under two separate projects, the Tilenga project in Buliisa and Nwoya districts, and the Kingfisher project in Hoima District. The Tilenga Project includes a Central Processing Facility (CPF) with capacity to process 190,000 barrels of oil per day, and over 412 wells (including 189 injectors, 190 producers and 33 observers) which are planned to be drilled on 35 wellpads. The CPF is an infrastructure used to process crude oil, which is received directly from the oil wells, by removing impurities and water and also separating the produced gas from the crude oil. The Tilenga project is also planned to have 250 kilometres flow lines which will transport crude oil within the oil fields and a 110 km feeder pipeline which will transport the processed crude oil from the CPF in Buliisa to the export hub and refinery in Kabaale. On the other hand, the Kingfisher project has a planned CPF with a capacity of 40,000 barrels of oil per day and 31 wells (11 injectors and 20 producers) to be drilled on 4 well pads. The project is planned to have 16 kilometres of flow lines and a 55km feeder pipeline from the CPF in Buhuka, Hoima district, to the Export Hub and refinery in Kabaale.
- Preparations for, and construction of the 1445km, 24-inch buried and heated East African Crude Oil Pipeline (EACOP) from Kabaale, Hoima in Uganda to Chongoleani in Tanga, Tanzania. The pipeline will have a loading pad in Kabaale, six pumping stations and 27 heating stations along the route together with a facility to load crude oil on to tankers at Chongoleani. The export pipeline route was agreed and an Inter-Governmental Agreement between Uganda and Tanzania the implementation the EACOP was concluded. Selection of contractors, accessing the pipeline route and the preparatory phases of construction are commencing.
- Participation in the selection and negotiation of agreements with a lead investor for the 60,000 BoPD greenfield refinery in the country.
The activities listed above do not only represent an increase in the number of activities in Uganda’s oil and gas sector, they also represent a significant expansion of their scope. As an example, the over 400 wells, which are planned to be drilled over the next 3-4 years, as part of preparing the already discovered oil field for production, represent a significant increase from the 121 wells which were drilled over the 12-15 years period of previous exploration and appraisal. The investment in the sector, over the last 15 years, is estimated at just over US$ 3 billion while that expected over the next 5 years is between US$ 15- 20 billion.
Spearheading National Content Development
Implementation of the above activities, especially putting in place the infrastructure, presents enormous opportunities for fast tracking the country’s development through, among other things, the participation of Ugandans and Ugandan enterprises in providing the required goods and services. Significant efforts are being made to ensure achievement of optimal participation of Ugandans and Ugandan enterprises in these activities. These efforts include the registration and publishing of all potential goods and service providers on the National Suppliers Database (NSD) for the country’s oil and gas sector. The NSD will improve visibility of the capabilities and experience of the entities registered. This will in turn facilitate the identification of any gaps the Ugandan entities registered on the NSD may have, and undertaking of the necessary skills development to cover these gaps.
In addition, associations such as the Association of Uganda Oil and Gas Service Providers (AUGOS), which have been established and the existing ones such as the Uganda Chamber of Mines and Petroleum (UCMP), are being promoted as avenues for sharing of information on the opportunities in the sector in a more efficient and effective manner. The PAU is also working with the licensed oil companies and their key sub-contractors to hold workshops where the details and quantities of the goods and services required for the different activities are presented to the entities registered on the NSD. This facilitates Ugandan entities to better appreciate the opportunities available and prepare themselves to participate in delivery of the required goods and services.
Development of skills through certification which will enable Ugandans meet the stringent requirements for employment in the sector is also ongoing and hundreds of Ugandan technicians now have international certification and are available in country. The numbers of certified technicians required for the sector are in thousands and certification in the country is therefore continuing.
All the above activities, plans and aspirations have to be implemented harmoniously by the different public and private sector institutions so as to achieve the goal of the National Oil and Gas Policy for Uganda which is “To Use the Country’s Oil and Gas Resources to contribute to Achievement of Poverty Eradication and Create Lasting Value to Society’.
Going by the saying that, “A chain is only as strong as its weakest link”, the timely and efficient participation of the different stakeholders in the sector will be critical in realizing the development of a desirable oil and gas sector, that bring benefits to Uganda and its citizens, and an attractive and rewarding environment for investment.
The Petroleum Authority of Uganda will work with the New Vision Printing and Publishing Corporation Limited during 2018 to bring out the planned activities in the sector, together with the roles, contributions, and progress being made by different participants in the different pull outs during the year. The PAU welcomes this opportunity to continue building knowledge of the Ugandan society about the oil and gas sector.
For God and My Country.