UNOC eyes a greater role in Uganda’s oil transformationJuly 5, 2022
Emmanuel Katongole, chairman of Uganda National Oil Company (UNOC), talks to The Energy Year about the company’s plans to grow its market share in all areas of the oil and gas value chain and challenges Uganda needs to overcome in order to take advantage of its hydrocarbons resources. UNOC is responsible for state participation in Uganda’s upstream, midstream and downstream sectors.
Which key milestones has UNOC marked since it was established in 2014?
UNOC was established under the Petroleum Exploration and Development and Production Act 2013, which gives us the mandate to manage commercial and business aspects of the oil and gas business. The company was incorporated in 2015 under the Companies Act of 2012 with the Ministry of Energy and Mineral Development holding a 51% stake and the Ministry of Finance, Planning and Economic Development holding the remaining 49%. Although we are a state-owned enterprise, our formulators wanted us to have the flexibility to run like a private company and not be bogged down by public-sector bureaucracy.
We have two subsidiaries, the National Pipeline Company which manages pipelines and storage terminals and is currently the shareholder together with our partners TotalEnergies, Tanzania Petroleum Company and CNOOC in the East African Crude Oil Pipeline [EACOP].
Our other subsidiary is the Uganda Refinery Holding Company, responsible for refinery and petrochemical businesses and management of petro-based industrial parks. Work is ongoing with our partners to develop a refinery. The front-end engineering design has been completed. By mid-2023, we expect to make a final investment decision for the refinery project.
What kind of involvement does UNOC have in upstream operations?
Uganda National Oil Company is a strong participant in the upstream segment. We hold the 15% State interest in the production licences that form the Tilenga and Kingfisher projects. We are in partnership with TotalEnergies in the Tilenga oilfields and with CNOOC in the Kingfisher oilfields.
We are a young company, but everything starts with a first step. We have the manpower and are confident that we can start exploration on our own. We have submitted an independent application for the Kasuruban block and are in the final stages of securing a production-sharing agreement. We are also progressing a joint application for the Pelican-Crane block, which will be developed by a joint venture between UNOC and CNOOC. We are negotiating for a participating interest on top of the 15% State participation.
We are hopeful that by the end of this year, we will have two production-sharing agreements, one of which we will be seeking partners for. When you have your own licences, it is different from having only a 15% share allocated by law. We can work on our own terms.
What kind of midstream projects is UNOC working on?
We hold a 15% shareholding in EACOP. This is in partnership with TotalEnergies, CNOOC and Tanzania Petroleum Development Corporation. We are participating in this project through our subsidiary the National Pipeline Company. We don’t want to be a silent partner in this project; we want to bring value while learning. We have secured the funding for our participation and are part of the leadership team of the EACOP company, which is a big achievement.
We are also part of the refinery development. We aim to hold a 40% share in the refinery, and we are deeply involved in the project structuring and the commercial negotiations. We have a team of engineers, economists and finance and legal experts working to make sure we structure the project that will refine our own oil. We want to become experienced in refining and the marketing of petroleum products. Demand in the local market and neighbouring countries is high; regional markets such as the DRC, Rwanda, Tanzania, Burundi and even some parts of western Kenya hold potential for exports.
Another project in the midstream sector is the industrial park in Kabaale. This project is in an area of 29 square kilometres that has the second international airport, the refinery and export hub as anchor projects. The airport construction is close to completion. We have completed the land allocation policy and are currently in the process of securing a joint-venture partner to develop and operate the industrial park with. Besides refining, we want to concentrate on the creation of value from byproducts of refining, especially petrochemicals and fertilisers.
What is UNOC doing to build its downstream capacity?
UNOC has three projects in the downstream. The Jinja storage terminal, the Kampala storage terminal and trading in bulk petroleum products. We are building our capacity in petroleum storage and trading. We have a role in securing supply of petroleum products in the country and the terminals will support this initiative while delivering commercial value.
The Jinja storage terminal is already operational in partnership with One Petroleum Uganda Ltd. It is a 30-million-litre terminal, and we are now looking at opening up for lake transport by constructing a jetty at Lake Victoria and a connecting pipeline to the terminal.
The Kampala Storage Terminal is a key strategic project for us. It will receive refined products from the refinery and serve as a distribution hub for the local and regional markets. We have done a lot of work on the project and have had a lot of interaction with our transaction adviser on developing a bankable project and we are at the point of identifying a partner.
As a national oil company, it is our responsibility to contribute to the security of supply of petroleum products. We are undertaking bulk trading as a business. Although we have started with minimal volumes, we intend to ramp up the volumes through agreements with supply partners. We continue to explore opportunities for supply at competitive terms with several companies, including global market players like ADNOC [Abu Dhabi National Oil Company].
How important are environmental and social aspects for the company?
We are very concerned about the environment, social aspects and good governance. We make sure our commercial business approach addresses environmental concerns. There is a global push for green energy. We believe we can have clean energy without it being at the expense of those who suffer from poverty. There is more than enough innovation and technology in the oil and gas industry that can make the environment safe. This is complemented with other initiatives like tree planting that can be done sustainably to reduce the emissions impact on the environment.
What major challenges is UNOC facing in growing its market share in the oil and gas sector?
One hurdle is the access to affordable financing. Our shareholders are the Ministry of Energy and Mineral Development and the Ministry of Finance, Planning and Economic Development, who need to identify funding from the national treasury. However, funding from the national treasury has many competing demands. While relevant organs of the state are addressing these issues, it is still a challenge. We are trying to look at other feasible alternatives for financing to complement the efforts by the treasury.
Another challenge as we start production is access to markets. There is a volatility in oil and gas markets around the world. The effects of the current conflict between Russia and Ukraine have changed the market. These are normal aspects of doing business; there is no business in this world that will not have similar challenges. What matters is that one has people who are ready to face these challenges and turn them into opportunities.
What major milestones have led to the stable development of the Ugandan economy?
The biggest achievement that Uganda has attained is peace. We went through very difficult times to get to where we are now. However, in the last 20 years we have seen the rise of a peaceful and stable nation. It is not a country without problems, but we have achieved a lot compared to the rest of Africa. Another large achievement is attaining a free-market-driven economy. People can do investments and do them without fear. Additionally, we have seen a huge rise in the level of literacy. Education is a crucial factor in every country’s development.