Next development phase of oil sector

Energy Minister Ruth Nankabirwa (C) views architectural works for the Kingfisher development project during the launch at the weekend. PHOTO | FRANCIS MUGERWA

What you need to know:

  • In the mostly capital intensive oil and gas industry, FID is a momentous milestone

The clock for the next development phase started ticking on February 1. 
Once government and the joint venture partners - TotalEnergies EP, CNOOC, Uganda National Oil Company (UNOC), and the Tanzania Petroleum Development Corporation (TPDC) –  then doors were flung wide. 
Ugandans had for long waited for the announcement of the Final Investment Decision (FID). 

In the mostly capital intensive oil and gas industry, FID is a momentous milestone. In Uganda’s case, the French oil giant TotalEnergies SE chief executive officer Patrick Pouyanne, speaking on behalf of joint venture partners, announced investment of $10b (Shs34 trillion) in the development phase .
Where is the money coming from? 
The joint venture partners are still holding cards close to the chest. 
At least $3.55b (Shs12 trillion) for development of East African Crude Oil Export Pipeline (EACOP), $3b (Shs10 trillion) for Kingfisher, and $4b (Shs13 trillion) for Tilenga is needed.
But as far as work is concerned, the Petroleum Authority of Uganda director of legal and corporate affairs, Ali Ssekatawa, says all work will be done by 2025 to “switch on the taps for first oil.”

“In simple terms development means actual work,” Ssekatawa says.  “Contracts, reviews, etc; that is office work. Construction and installation is laying that pipe, well-paid, rig, office block, camp yard, infrastructure needed on the ground to deliver first oil,” he says. 
Remember, Ssekatawa adds: “This is an integrated project - Kingfisher, Tilenga and EACOP - so work has to move hand in hand. It is easy to ask when construction starts; you might find that engineer who is going to lay the pipes is ready but you need to acquire the land where the pipes are going to be laid.”

On the ground in Albertine Graben, which straddles the mid-west and northern Uganda, there is a flurry of activities. The pace expected to intensify in the coming months with the award of more tenders.
Total Energies EP mid-last year awarded the engineering, procurement, construction, supply construction and commissioning tender to a consortium of McDermott and Sinopec to develop  Tilenga oil project - oil fields in Nwoya and Buliisa districts.

Other 10 contracts to drill and manage  Tilenga oil wells were awarded to  ZPEB Uganda for detailed design and construction of drilling rigs to be used on 426 wells while casting and tubing was contracted to Vallourec. Mud logging went to Exlog Drill and waste management to EnviroServ.
China Oilfield Services was awarded two contracts for electrical logging, and drilling fluids, cementing and solids control while  Schlumberger was awarded four contracts for directional drilling, logging , drilling, drilling bits and real time operations; wellheads and Xmas trees; lower completion; upper completion and artificial lift
A separate contract for civil works, including bush clearing, fencing, and construction of feeder roads and drainage, at the industrial area spanning 700 acres for Tilenga to MotaEngil, which subcontracted work to several companies such as Prand Engineering, Fabrication Systems, Civtec, Gauff Consultants.  The industrial park will host among others, the Central Processing Facility, construction camps, and operational bases.
 
MotaEngil was also awarded the contract to construct 31 well pads and installation of conduct pipes.
A Central Processing Facility is where oil will be stored for stabilisation and treatment before it is fed into either the proposed refinery or pipeline. 
A second Central Processing Facility is planned at CNOOC’s Kingfisher project further down south in Hoima. 
Civil works and construction of well pads 1, 2 and 3, and construction of feeder access roads at Kingfisher was awarded to Excel Construction.

According the Petroleum Authority of Uganda, additional contracts on the Kingfisher project including drilling and well services are due for award. 
A separate contract to design, construct a permanent camp, supply base and security station was awarded to China State Construction Corporation Services.
CNOOC was the first to acquire the production licence for Kingfisher in 2013.  The Energy Ministry put the cost of developing the field to be able to pump first oil at around $3b (Shs10 trillion).

For the development of the proposed EACOP, Australia’s Worley is the lead on engineering, procurement, and construction management tender, Italy’s ISOAF Construzioni SRL for the tender to manage the coating plant, while French multinational company, Schneider Electric was handed the EITS - electrical, instrumentation, telecoms, and security - contract. Bolloré Logistics was awarded logistics contract to haul required construction material from around the world to Dar-es Salaam port en route to the interior.
Russian’s ChelPipe and Greece’s Corinth Pipeworks, are said to be frontrunners for the tenders to supply a large tonnage of pipes, which will be hauled to the coating plant in Nzega, Tabora region in Tanzania.

Equipment needed        
Officially, both government and joint venture partners admirably speak of the steps taken so far and reaffirm government’s 2025 production start date but in the background, some admit that the target could be too ambitious.                                                   Up to 12 million tonnes of equipment and material need to be imported and delivered to the oil region.          So far, government has delivered on its end of the bargain of infrastructure, notably,  the 600 kilometres of road, which cost Shs3.2 trillion and the Kabaaale International Airport, which cost about Shs1.3 trillion.                                                                  
One oil executive although, told Daily Monitor once that they never asked for the airport. As regards fast-tracking of the project, Ssekatawa says the developers – joint venture partners - are in charge of sequencing their work.                                                                “For us, come 2025, we should be in Tanga testing the tap for first oil.”                                                                         According to Petroleum Authority of Uganda, the development phase is expected to create some 14,000 direct and 45,000 indirect jobs.                                   And about the oncoming $10b in investments, the plan is to ensure that Ugandans rake in at least 40 percent of that through provision of goods and services. 

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