Uganda’s oil and gas could spur profound change

Uganda

“Now is the time. Uganda is the right destination for investment.” As H.E. President Yoweri Kaguta Museveni has said, 2022 represents a significant milestone in Uganda’s oil and gas developments and by extension the potential to drive growth in other economic sectors linked to the production of hydrocarbons in the country.

The announcement in February 2022 of the FID for Uganda’s oil and gas projects by TotalEnergies EP Uganda, CNOOC Uganda, the Uganda National Oil Corporation (UNOC) and the Tanzania Petroleum Development Corporation (TPDC) signalled a major achievement in Uganda’s path to first oil, which is expected in 2025.
In April 2021, Uganda, Tanzania, TotalEnergies and CNOOC had signed three key agreements towards the development of the Tilenga and Kingfisher projects and the East African Crude Oil Pipeline (EACOP): the Host Government Agreement, the Share Holding Agreement and the Tariff and Transportation Agreement for the EACOP, which will transport the crude oil from the Lake Albert projects to the Indian Ocean port of Tanga in Tanzania.
When Hardman Resources made the first commercial discovery in 2006, the find’s estimated commercial resources were 300 million barrels of oil. By 2011, Total and CNOOC entered the market and the sector saw a quick development of the regulatory and legal framework to improve investment conditions. After the exploration of only 40% of the basin, the country’s estimated reserves skyrocketed to 6.5 billion barrels of oil, of which 1.4 billion are currently deemed recoverable, mostly focused on the Lake Albert projects. The country’s drilling success rate is among the world’s highest at 88%, Petroleum Authority of Uganda (PAU) executive director Ernest Rubondo told The Energy Year.
Currently, the Lake Albert project shareholders are TotalEnergies, with a 56.67% stake (operating the Tilenga Project in Contract Area 1 and License Area 2 North); CNOOC, with 28.33% (operating the Kingfisher Development Area); and UNOC with its minimum 15% mandated share. The development of the Kingfisher and Tilenga projects, plus the Kabaale refinery and the EACOP, are expected to require USD 15 billion-20 billion in investment over the next four to five years, of which at least 40% is slated to remain in Uganda.

TILENGA: The Tilenga project, operated by TotalEnergies EP Uganda, covers three production licences in Contract Area 1 – Jobi-Rii, Gunya and Ngiri – and three in License Area 2 North: Kasamene-Wahrindi, Kigogole-Ngara and Nsoga. The total expected production of these fields is 190,000 bopd.
Following the February 2022 FID announcement, major contracts were announced and contractors were mobilised. Tier 1 contractors include McDermott, Sinopec, ZPEB, Vallourec and Mota-Engil Uganda. Drilling rigs are currently under construction in China and the first is expected to arrive in the second half of 2022 so that drilling can kickstart in December 2022.
The project will comprise more than 426 wells with more than 160 kilometres of flowlines connecting the fields to the central processing facility (CPF). The CPF will have a capacity of 190,000 bopd, and will be connected via a 24-inch, 95-kilometre pipeline to the Kabaale refinery.

KINGFISHER: The Kingfisher project is operated by CNOOC. The Kingfisher Development Area (KFDA) covers the Kingfisher field in the area formerly known as Block 3A, located in the Kikuube district, and there are future plans for tie-ins of the Mputa-Nzizi-Waraga fields in the Hoima district. The total production expected from these fields will be 40,000 bopd.
CNOOC obtained the production licence for the KFDA in September 2013, and the Environmental and Social Impact Assessment certificate in February 2020. The upstream development will comprise 31 wells to be drilled in four well pads, as well as a 40,000-bopd CPF fed by 19 kilometres of flowlines. Midstream-wise, a 46-kilometre pipeline will connect the CPF to Kabaale.
Both the Tilenga and Kingfisher developments, whose combined output is expected to reach 230,000 bopd, will be connected via feeder lines to the UNOC-managed Kabaale Industrial Park near Hoima. The Kabaale Industrial Park will comprise an international airport, expected to be operational during 2023; Uganda’s crude export hub, from which EACOP will start; a 60,000-bpd refinery, whose FID is expected in 2023 and its completion in 2027; and an industrial park.

EACOP: The EACOP will require a USD 3.5-billion investment for a 1,440-kilometre, 216,000-bopd capacity pipeline that will export crude oil from Kabaale in western Uganda to the port of Tanga. The EACOP will be the world’s longest electrically heated crude oil pipeline, allowing the transportation of Uganda’s high-viscosity oil. The pipeline will be managed by the EACOP Company, formed by operator TotalEnergies (62%), UNOC (15%), TPDC (15%) and CNOOC (8%).

THE RIGHT APPROACH: The development of capacity and expertise in waste management represents a key topic in Uganda’s nascent oil and gas sector. In the exploration and appraisal phases of the projects alone, around 34,000 tonnes of drill cuttings and 5,700 cubic metres of drilling fluids were generated and safely disposed of.
EnviroServ, a waste management company, in 2014 built its facility in Hoima, which includes a laboratory to test incoming wastes, a sewage treatment plant, a landfill engineered to international design standards and a contaminated stormwater dam to contain run-off from the site. The treatment plant also has 11 boreholes around the landfill that are used to monitor the groundwater quality and ensure no contamination of groundwater occurs.
Education, training and capacity building are also important topics directly linked with the goal of reaching a 40% share for national content spend. The Uganda Petroleum Institute Kigumba is an example of the country’s efforts to create educational institutions in the Lake Albert region that cater to the oil and gas sector’s technical needs. The Uganda Industrial Research Institute, located in the Namanve Industrial Park in Kampala and created under the Ministry of Science, Technology and Innovation, is another instance of an institution vying to maximise efforts to train Ugandans in skills needed to nurture a competitive industrial sector in the country.

DRIVING INDUSTRIALISATION: It is a priority of Ugandan policymakers and regulators to follow H.E. President Museveni’s vision to use gains from oil and gas developments to drive growth in other sectors through economic linkages that foster in-country capacity and Uganda’s industrialisation push. The progressive development of Uganda’s oil and gas sector is contributing to an improved perception of the country’s business atmosphere, which is translating into an increase in investments.
In the steel products manufacturing arena, examples include Roofings Group’s investments in its rolling mills complex and polypipes facility; as well as Tembo Steels’ recently inaugurated iron ore smelting plant.
In the downstream logistics sector, significant investments can be found in Fortune Group’s Mahathi Infra Uganda Oil Terminal, which will comprise a tank farm with a capacity of 70 million litres, a jetty on Lake Victoria, and four 4,500-tonne oil tankers.
Electrification, improvements in power transmission and distribution networks, and investment in power generation capacity are key objectives being pursued by the Ministry of Energy and Mineral Development in parallel to Uganda’s oil and gas push. The country’s generation capacity is set to reach 5 GW by 2040 as a necessary condition for its industrial growth, being championed under the leadership of H.E. President Museveni.
The indelible marks in infrastructure development, technical capacity and technology transfer, synergies and economic linkages, increased direct investments and industrial growth are key pillars of the economic and social advances that the culmination of Uganda’s path to oil and gas production are bound to materialise for the country. The Energy Year Uganda 2022 will offer a survey and analysis of these key issues and will celebrate Uganda’s 60th anniversary of its independence through the vision and perspectives of the country’s key decision-makers and business executives that are playing a crucial role in making first oil in 2025 an objective that is closer than ever.

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