The Energy Year talks to Fred Kabagambe–Kaliisa, Uganda’s senior presidential advisor on oil and gas and the minerals industry, talks to The Energy Year about key milestones in Uganda’s long road to accessing its hydrocarbons potential, current challenges facing power generation and how the oil and gas sector has supported the growth of the economy and local communities.
What policy changes did the Ugandan government make following the commercial oil discoveries?
The first commercial oil discoveries were made in 2006, which marked the closure of a long history of uncertainty with regard to prospectivity of the Albertine Graben. We were able to confidently say that there was a working hydrocarbon system and that the fields were commercially viable. From there, we could finally advance into other areas such as planning for field development and commercialisation.
In 2006, the policy guiding the sector discussed in 1986 and concretised in the broad Energy Policy of 2002 required a robust upgrade. Previously, we had avoided creating huge institutions and other policy frameworks before an actual commercial discovery was made. We then began developing a new policy framework, which became the National Oil and Gas Policy for Uganda in 2008. This gave rise to new legal frameworks in the upstream and midstream sectors and a separation of institutions.
Up to this point, the energy ministry had been doing everything, including investment promotion, licensing, regulating and setting up policies as well as managing the state participation interest. Under the new mandate, we created separate roles so that the ministry could focus on setting up policies, proposing legislation, investment promotion and licensing.
We set up the Petroleum Authority to regulate the sector and the national oil company to perform the commercial aspects of the business and develop additional expertise in Uganda’s oil and gas industry. We unbundled the sector to attain efficiency and effectiveness of the institutional framework. As expected, some areas like licensing became contentious in terms of placement.
However, licensing in the oil business can be a challenging political issue; one needs to convince several stakeholders like Parliament, civil society organisations and other public and private institutions that companies have been licensed under sustainable terms and conditions. Hence the need to have the minister responsible for the petroleum sector perform the function anchored by the technical departments and agencies with guidance of Cabinet.
How much change will the 2025 achievement of first oil bring to the country?
Oil and gas will be the main enabler of Uganda’s economy. I keep sensitising everyone in the country that the Albertine Graben is the centre of crystallisation of our economy now. The government has taken strong steps to put in place infrastructure such as roads, an international airport and high-voltage power lines, which are driving a lot of growth in other sectors. For example, there is now a lot of interest in the agriculture and tourism sectors. We must not over-focus on the oil business and abandon other productive sectors. The oil sector’s growth will spur the entire Ugandan economy and support adjacent industries.
It has been a long journey. If the country had direct access to the sea or ocean for that matter, we would already be halfway through our production lifecycle. But we are only at the beginning. The next 10-20 years are going to be a period of significant economic development for Uganda. The future is bright.
However, we should not lose sight of energy security issues and that is why developing a refinery is of strategic importance. We do not want all oil pumped by pipeline to Tanga, Tanzania. Local value addition must be emphasised. We want to increase transportation infrastructure and oil security, but also propel other petroleum-based industries that benefit from raw materials produced at the refinery, such as plastics and pharmaceuticals.
What challenges does Uganda’s power generation sector face?
A key focus in the power business is to increase access and reliability of the power supply. Having no power or indeed unreliable power is much more expensive than having expensive power. Unreliable power is extremely costly, especially in industrial processes. Solely focusing on bringing down the cost of power generation is not a holistic approach!
One major challenge in the power sector has been a lack of systematic investment for decades especially before 2013. This issue has been relatively solved in the amount of power generation in the sector. We previously unbundled the sector to encourage private-sector participation and successfully promoted small, renewable hydropower plants. Then a decision was taken to have public investment in power generation hence the construction of the Isimba and Karuma hydropower dams.
We now need to improve and enhance the capacity of our transmission and distribution infrastructure. In 2001, electricity access countrywide was 5% and now access is around 57%, that is 19% on-grid and 38% off-grid. The Uganda Bureau of Statistics (UBOS) 2021 Report says that total electricity access is 56.6%. The components are: grid electricity is 18.9%; solar home systems are 11.1%; and solar kit systems are 26.6%. This is quite exciting for me, who led the team to design the first Rural Electrification Strategy and Plan, 2001, in which we put in place several delivery mechanisms for access to electricity like grid extension, isolated or mini grids, solar PVs etc. The strategy has worked!
However, we need to increase access to power and enhance reliability, and hence the urgency in investing in power transmission and distribution. All previous efforts and gains made through the private power distribution concessions and the Rural Electrification Agency should be consolidated and built upon.
What key factors have led to the growth of the Ugandan economy since the country became independent?
Education has been key. It can be a huge struggle to carry out the economic development of a country with a big illiterate population. People now have an opportunity to study because of our expanded secondary and university level education sector.
Another important element has been the rise in moderate health services. Immunisation has helped many children grow up in good health and has reduced preventable diseases in the country.
On that note, the power subsector has done a good job in delivering modern energy services that support the education and health sectors of our communities. Obviously, I should commend the young oil and gas industry’s role in Uganda’s economic development. Even during the exploration phase, money obtained from capital gains tax arising from the farm-down transactions in the oil and gas industry was spent on cofinancing the building of power dams and other road infrastructure. In addition, there has been a creation of jobs and supporting the local communities.
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