Whereas a number of Ugandans already know so much about Uganda’s oil, they know nothing or so little about gas. PHOTO/FILE

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How viable is Uganda’s gas?

What you need to know:

  • Ugandans have heard so much about oil already, but very little on gas.
  • In this article, we explore how Uganda will use its 500 billion cubic feet of natural gas and some other important facts related to the gas sub-sector.  

At least many Ugandans will admit, they have heard so much about oil but not gas. A lot has been said about oil, but less on natural gas. Natural gas has become an increasingly important energy source across the globe. 

World Bank projections indicate it is expected to become the second most used energy source worldwide by 2025, more important than coal. 

For now, Uganda is estimated to have at least 500 billion cubic feet of natural gas stored underground, alongside the six billion barrels of oil, of which 1.4 billion barrels are commercially recoverable.

However, according to Ernest Rubondo, the Petroleum Authority of Uganda chief executive, the current natural gas reserves ‘might not be sufficient’ in addressing the country’s needs, and not worth a profitable venture. 

The volumes, he says are less or if not ‘insignificant’, compared to other countries such as Tanzania and Mozambique, which have reserves of 57 trillion cubic feet and 100 trillion cubic feet, respectively. 

Therefore, he says, Uganda will concentrate more on producing oil than gas. 

It is still difficult for the Petroleum Authority of Uganda to estimate what the gas reserves will bring to the nation. 

However, it is estimated that between 70 percent and 80 percent of the country gas volumes is recoverable, similar to other oil and gas fields worldwide whose geological setting is relatively identical to the Albertine Graben. 

Predominantly, gas resources have been commercially discovered in the Albertine Graben region in the districts of Hoima, Kikuube, Bulisa, Nwoya and Ntoroko.

The first gas commercialisation is expected to happen in 2025, with production to be undertaken by Joint Venture Partners Total Energies E&P, CNOOC and the Uganda National Oil Company.

Rubondo says the associated gas that will be produced with oil will be mainly used in generation of heat and power for use in the operations. 

The remaining gas processed is expected to provide Liquefied Petroleum Gas, which could be sold both locally and regionally. 

However, the option of exporting the gas is currently not feasible given the relatively small volumes discovered so far. 

“The gas will initially be used to satisfy energy needs of the production operations,” Rubondo says, noting that: “Whatever is excess would then be used to meet the country’s energy demands. This is part of the evaluation being done to choose the optimal solution for excess gas utilisation.” 

Unlike countries such as Nigeria, Algeria, Senegal, Mozambique, Egypt and Tanzania that have huge proven independent natural gas reserves, Uganda’s associated gas will be produced alongside oil. 
The capital expenditure of production of gas is not independent. 

The revenue projections from gas alone are still under review as part of the studies on utilisation of excess gas.  

The demand for natural gas products such as Liquefied Petroleum Gas is both in local, regional and international markets.

Currently, Uganda consumes 32,000 kilotonnes of Liquefied Petroleum Gas per annum and demand is expected to grow to 40,000 kilotonnes by 2025. 

Across the region, combined demand for gas within East Africa currently stands at 612,000 kilotonnes and is expected to increase to 700,000 kilotonnes by 2025. 

Sale of natural gas compared to oil         
Natural gas and oil share many characteristics - both hydrocarbons - made up of carbon and hydrogen – they are both produced using similar methods and equipment.

However, they contrast in the way they are sold and priced. 

Oil is sold in volume or weight - typically in units of barrels. Different grades and sources of crude oil have different prices. Global oil markets are very liquid, relatively transparent, and involve numerous intermediaries and open exchanges.

By contrast, natural gas is sold by units of energy. Standard energy units include BTU, Therms, and Joules.

Natural gas produced from a subsurface reservoir contains a majority of methane plus various other heavier hydrocarbons. 

The relative proportion of heavier hydrocarbons versus methane would determine the energy content of the gas when combusted and, thus, its ultimate value to a customer. 

Customers therefore pay for energy derived from gas, not for a specific volume of gas.
Since natural gas is difficult to transport, natural gas prices tend to be set locally or regionally, not globally as for oil. 

For the majority of traded natural gas that is transported by pipeline, prices can be set by negotiation, regulation, or open-market mechanisms similar to those used in oil markets. 

The remaining portion of the natural gas trade is by shipborne Liquefied Natural Gas.  
In the Liquefied Natural Gas market, the majority of cargo is sold on a long-term contractual basis at prices either indexed to the cost of feed gas, floating price in the destination market, or indexed to oil or other commodities. Uganda won’t be a producer of independent natural gas 

The International Energy Agency quarterly report shows global gas demand is expected to increase by 3.2 percent in 2022, enough to offset the lost consumption in the 2020/21 pandemic period.

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