Commentary

Oil and gas resources will benefit all Ugandans

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By Rose Namayanja

Posted  Monday, July 21   2014 at  01:00

In Summary

Ugandans have an opportunity to make their input on how they want revenue from oil resource to be managed through their MPs or by seeking audience with the relevant committees.

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Government has made significant progress in the petroleum sector. This has been possible through investment in the human resource capacity through specialised training and procurement of specialised equipment to collect geological, geophysical and geochemical data. These efforts led to attraction of investment for exploration and more importantly, the discovery of commercial oil and gas reserves in 2006.

Cumulative foreign direct investment in petroleum exploration in the country since 1998 was more than $2.4billion at the end of 2013 an investment in the sector has increased as the country enters the development, and subsequently the production and refining phases of the petroleum value chain. Three oil companies are licensed to carry out exploration, development and production in four exploration areas. These are; Tullow Uganda Operation PTY LTD, Total E&P Uganda B.V and China National off shore oil corporation (CNOOC).

Twenty one oil and gas discoveries have been made in the country. Appraisal of these discoveries has established that petroleum resources in these fields and now estimated at more than 3.5billion barrels of oil equivalent in place with 1.4 billion barrels of these resources estimated to be recoverable.

Appraisal of the 11 discoveries has been concluded and a production licence over one discovery (King Fisher) was granted to CNOOC in September 2013. Review of application for the other 10 discoveries and appraisal of six discoveries is ongoing. Four discoveries reverted to government and will be available during future licensing round through open competitive bidding.

Government put in place a National Oil and Gas policy for Uganda in 2008 to guide the development of the sector. In line with the policy recommendations, two pieces of legislation, the Petroleum (exploration, development and production) Act 2013 and Petroleum (Refining, conversion, transmission and midstream storage) Act 2013 were assented to by the President and commenced in April and July 2013 respectively.

The Public Finance Management Bill, 2012 which provides for petroleum revenue management is currently at committee stage in Parliament. Ugandans have an opportunity to make their input on how they want revenue from oil resource to be managed through their MPs or by seeking audience with the relevant committees.

The Ministry of Mineral Development is in the final stages of setting up two institutions to manage the oil and gas sector. These are; The petroleum authority of Uganda to regulate the sector as well as the National oil company, to manage the business aspects of the sector on behalf of the government as provided for in the law.

Government continues to priotise training and capacity building of its officials in oil and gas related disciplines. Officials from various government ministries and agencies have been trained in the petroleum geo-science, law, audit, taxation and management. In addition, government established the Uganda Petroleum Institute in March 2010 to train Ugandans in artisanal and technical skills and certificates and diploma levels. Makerere University commenced Bachelors and master’s degree programmes in Geo-science in 2009 and 2012 respectively.

To ensure that environment and Bio-diversity protection is also prioritised, government has ensured development of the sensitivity atlas for the Albertine Graben and management plans for sensitive areas within the Graben such as Murchison Falls and Queen Elizabeth National Park and Budongo and Maramagambo forests, undertaking a strategic environment assessment (SEA).

A Memorandum of Understanding between the government and licensed oil companies which provides for a revised commercialisation plan for the development of the discovered oil and gas resources in the country was concluded during February 2014. The MoU provides for the Use of Petroleum for power generation, supply of crude oil to the refinery to be developed by the Government and export of crude oil through and export pipeline or any other visible option to be developed by the oil companies. Government is working with licensed oil companies to prepare an implementation plan to achieve the objectives of the MoU.

Government is prioritising the development of the 60,000 barrels per day refinery in Uganda to add value to the country’s petroleum resources in addition to ensuring security of supply of petroleum production. Government is acquiring 29km2 through implementation of a comprehensive resettlement action plan (RAP) for persons affected by the refinery in Kabaale Parish, Buseruka Sub-county Hoima District where the refinery will be developed.

A Transaction advisor, Taylor- Dejongh from USA, was contracted to support government in structuring the refinery and identifying a lead investor for the refinery project. Six Consortia have been shortlisted through a competitive process and issued a request for proposal to bid for the lead investor. The firms/consortia are:-Consortium led by China Petroleum Pipeline bureau, Marubeni Corporations (Japan), Consortium led by PETROFAC (UK/UAE), Consortium led by RT-Global resources (Russia), Consortium led by SK Energy (Korea), Consortium led by VITOL (Switzerland)includes Samsung C & T from South Korea. It is hoped that a lead investor will be selected from the six firms that expressed interest to construct the refinery by September, 2014.

The first phase of the refinery is expected to be complete by 2017/2018. The refinery when established will provide additional employment opportunities to Ugandans.

A strategic plan for the transportation and storage facilities of petroleum commodities and products is now being developed in conjunction with the consultant, Worley Parsons. This strategic plan is expected to be completed during 2014. Road networks in the Albertine Garben are also upgraded starting with the Hoima-Buseruka-KaisoTonya Road whose construction is ongoing.

The East African partner states are also working together to take forward development of key infrastructure such as pipelines, Uganda’s refinery project and refurbishing the railway network to support the development in the regions petroleum sector and promotion of investments in the oil and gas sector.

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