2024: A quiet year for the oil and gas sector

At the start of the year, there was euphoria that the country would see its first commercial oil in 2025.

However, in October Monitor reported that the wait could stretch into 2027 – since there were no substantial commitments to finance the 1443-kilometer East African Crude Oil Pipeline (EACOP), a key project in the production of Uganda’s oil. 

First oil production has been postponed several times. However, when government promised to finally deliver next year, it looked like a viable promise, given the attendant investments, only to confirm what had been rumoured for months. 

Uganda’s known oil deposits in the Albertine Graben are estimated at 6.5 billion barrels with 1.5 billion recoverable. The country had pinned its hopes on oil revenues to replenish forex reserves, speed up debt financing, and fast-track infrastructure development. But the plans will be differed. 

Until oil starts flowing, government may have to look elsewhere to finance the country’s needs. 

But as we look ahead, we look back at what shaped the oil and gas sector in 2024. 

EACOP financing is still on ice

The 1,443 pipeline snaking from Hoima in western Uganda, through Tanzania to the port of Tanga is a key component in Uganda’s oil journey.

Once complete, it is expected to move up to 170,000 barrels of crude oil for export. Without it, the entire oil project is on halt until Uganda develops its refinery of which there is no substantial movement in that area.

Earlier in the year the EACOP Company reported the arrival of the first batch of insulated pipes at the project camp in Kyotera District, signalling the start of the laying of the pipes.

Down the road, completed works are estimated at more than 50 percent.

However, the pipeline is still dogged by financial constraints as financiers shy away from the project.

Kampala streets and some European capitals such as Paris have played host to demonstrations with activities baying to #StopEACOP, which has resulted in some arrests, especially in Kampala.

In a way, this has scared potential funders, with European and Asian bankers and insurers rolling back on their commitment. 

Environmentalists claim that once complete the project will cause significant damage to the Lake Victoria Basin ecosystems, surrounding forests, game parks, and water systems.

Energy Minister Ruth Nankabirwa however, remains unyielding, saying a funder for the pipeline will be procured. But for now, the options on the table include raising equity among the project partners.

“We have revised the funding options from 40:60 equity to debt ratio to now 58:42,” Nankabirwa said while speaking at the 29th Conference of the Parties to the UN Convention on Climate Change in Baku, Azerbaijan.

EACOP is expected to cost up to $5b (Shs18 trillion) and it is being developed as a joint venture, in which Total Energies holds 62 percent, UNOC, and the Tanzania Petroleum Development Corporation, 15 percent each, and CNOOC 8 percent.

Exploration shifts gears

In the exploration space, government expressed its desire to expand its search for hydrocarbons from the Albertine Graben to the Moroto Kadam Basin by inviting feedback on three blocks that is the Hoima, Lake Kyoga, and Moroto–Kadam Basin.

Late in October State Minister for Energy Sidronius Okaasai Opolot, issued a call for feedback on the three blocks as an invitation for the public to give their opinion if there is anything that warrants to halt the exploration.

At the expiry of the 90 days, a call for exploration licenses will be issued.

Currently, there are explorations going on in the Avivi, Omuka, Kasurubani, which are manned by UNOC, Turaco, and Nagali areas that scale from Lake Albert to West Nile and parts of Northern Uganda.

However, to date, no significant discoveries have been reported.

UNOC corporate affairs manager Tony Otoa, said that there are interesting discoveries in the Kasurubani Area, where UNOC is exploring and major updates will be provided next year. 

If the exploration bears fruits, it will add to the already proven deposits in the King Fisher and Tilenga projects.

UNOC imports fuel

In July this year, UNOC came through on its mandate of being the sole importer of refined fuels ending decades of dealing with Kenyan fuel marketing companies, which President Museveni has previously referred to as middlemen.

The President had also at some point referred to fuel marketing companies as parasites, who were exploiting Ugandans with exorbitant pump prices, and an inflated importation bill by more than $25 per barrel

The first shipment came with over 650,000 barrels of Petrol and more than 500,000 barrels of diesel.

However, Kenya slapped a $40m levy on the 80,000 barrels that were undeclared to the Kenya Ports Authority.

It created a scene, with government officials lamenting over the unfairness and a ploy to frustrate government’s effort to tame fuel prices in Uganda. 

Fast forward, the impact of the imports is starting to be felt at the pump, with the price falling from an average of Shs5600 to about Shs4,890 for the two largest suppliers – Shell and Total.

However, other dealers have recorded prices of about Shs4,500 for petrol. 

Nankabirwa last week said that whereas the prices are not where government would want them, the impact of government’s intervention has already been felt and prices are expected to drop further. 

On his part, Otoa says the price will continue to go down in 2025.

“The impact of the imports is already being felt, the Shs1600 drop in price is big and we predict that as we continue to import in 2025 it will stabilise the pump price and the energy security of our country,” he said. 

The fuel imports coincided with the launch of the Kawuku terminals and the opening of the sea route from the port of Kisumu to Kawuku via Lake Victoria.

Currently, there are two burges with each having a capacity of five million litres. Thus, this has reduced the costly fuel imports by road through Malaba.

Looking ahead to 2025, finding a funder for the pipeline and finalizing the final investment decision for the $3.5b refinery will be key events to track. 

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