Daudi Migereko
6 August 2007
opinion
Kampala — It is true that the country has experienced difficulties in the area of power supply.
This has been mainly for three reasons: a drought which affected the East African region from 2003 to October 2006, thus affecting the country's hydro-power resources; the delay in constructing new power plants to meet the growing demand for electricity; and over-dependency on external financing for our country's power needs.
The Government has come up with a plan to meet the country's electricity supply. The plan includes provision of emergency thermal power supply, with 100 MW so far installed, 50 MW to be installed by October 2007 and a further 50 MW based on Heavy Fuel Oil to be installed by May 2008.
The plan also involves in the short term to implement loss reduction measures and energy efficiency measures, including the distribution of 800,000 energy saver bulbs. In the medium term, the 250 MW Bujagali, the 200 MW Karuma and the 100 MW Isimba hydro-power projects are to be constructed to meet the growing demand for electricity. Several renewable energy projects, including biomass co-generation in the sugar factories, small hydro-power schemes, solar PV and solar thermal and gasification, will be developed.
With the commercial discovery of oil and gas resources, an Early Production Scheme is being packaged with one of the companies, Tullow Oil, to produce 50 - 100 MW of thermal generated power using heavy fuel oil by 2009. Diesel and kerosene will also be produced by this project.
Bujagali and Karuma
The Government has not 'hurried' to build the Bujagali project since work on it started more than 10 years ago. Our main hindrance has been the availability of funds to realise the construction of such projects.
This August House endorsed the establishment of an Energy Fund, which has made it easy to contribute to the financing of the development of power generation capacity.
The lead time for development of power projects is long because feasibility and environmental studies, procurement of sponsors and contractors and protracted negotiations with various parties, including lenders and project sponsors, have to be carried out. In that regard, Bujagali and Karuma are the most advanced Victoria Nile projects ready for implementation.
The Leader of Opposition expressed apprehension over our capacity to construct Bujagali and Karuma projects due to infrastructure and logistical capabilities. I wish to point out that Bujagali hydro-power project is not the first to be implemented in this country. The Owen Falls project was constructed in the late 1940s, when the infrastructure and technology were less sophisticated. In recent times, work has been carried out on the extension project (Kiira). Other projects include Mobuku 3 for Kasese Cobalt and Nyagak in West Nile which is under construction. The Government therefore has the capacity to move these projects to completion.
There is the issue of corruption. I wish to point out that no corruption cases have been cited during the re-packaging of the Bujagali Project. Furthermore, all the requisite preparations right from the selection of the sponsor (Bujagali Energy Limited), the selection of the engineering, procurement and construction contractor, the economic and financial analysis of the project and the mobilisation of funds have been accomplished in a transparent manner.
Therefore, the country is more than ready to implement the Bujagali project. Work has commenced and we expect commissioning of the first 50 MW unit after 36 months, in July 2010. The entire plant will be ready for commissioning within 44 months. All stakeholders including the Government, the project sponsors, the lenders and the contractor Salini, have signed agreements which incorporate stringent penalties on the side of BEL and Salini if timelines are not met.
Cement
The construction of the Bujagali project is not responsible for the shortage of cement, let alone its high prices in the country. The shortage is due to the boom in the construction industry, arising out of our sound economic policies.
Secondly, the peace in the neighbouring countries, to which the NRM Government has contributed, has led to an increase in demand for cement from our factories. More importantly, because of the peace Ugandans are enjoying, there is increased investment in long-term projects which require huge amounts of cement.
Our ministry has been studying the situation so that the current shortfall of over 500,000 tonnes annually is bridged. The cement industries have made arrangements to boost their production. Tororo Cement Limited has finished its expansion and ready to double production from 450,000 tons to 900,000 tonnes per annum. Hima Cement is also working on expanding production from 300,000 tons 780,000 tonnes per annum by 2009. As a stop-gap measure, we are importing cement.
Other interventions include exploration and development of other limestone resources country-wide to increase cement production. The already identified limestone occurrences include Muhokya and Bwera in Kasese district, Dura in Kamwenge, Kaku in Kisoro, Metu in Moyo and Katekekire in Karamoja. Karamoja supplies are being targeted. We are working with Tororo Cement on providing electricity to Moroto to facilitate exploitation of this resource. Because of these interventions, the cost of constructing Bujagali will not double on account of cement.
Oil and gas
Regarding the background and status of hydro-carbon exploration in Uganda, the Albertine Graben, which forms the northern most part of the western arm of the East African Rift System, is the principle prospective area for petroleum in Uganda.
The Petroleum Exploration and Production Department, since its inception in 1991, carried out geophysical and geological surveys and identified prevalence of optimal conditions for generation and accumulation of hydrocarbons in the Graben. Subsequently, the Graben was divided into seven Exploration Areas, of which four areas are licensed to oil companies after signing Production Sharing Agreement with the Government.
The four licensed areas are:
- Exploration Area 1: licensed to Heritage Oil & Gas and Tullow Oil at 50% each in July 2004.
- Exploration Area 2: licensed to Hardman Petroleum Africa, now Tullow Oil, in October 2001.
- Exploration Area 3A: licensed to Heritage Oil & Gas and Tullow Oil, at 50% each in September 2004.
- Exploration Area 5: licensed to Neptune Petroleum of Tower Resources Group in September 2005.
- Exploration Area 4B: Licensed to Dominion Petroleum in July 2007.
Discoveries have been made in the following prospects:
- Mputa, EA2. Two wells: Mputa 1, Mputa 2 were drilled in 2005 and 2006 respectively and both discovered oil. Mputa 1 was tested and flowed 1,100 barrels per day. This oil is sweet (low sulphur content) but waxy, with API gravity averaging 30o.
- Waraga, EA2. Waraga well drilled in 2005 flowed 12,050 barrels per day. This oil is also sweet but waxy, with API gravity averaging 30o.
- Kingfisher, EA3A. Kingfisher-1 and its sidetrack, Kingfisher-1A, were drilled in 2006 and 2007. Both wells flowed 13,893 barrels per day. This oil is also sweet but waxy with API gravity averaging 31o.
- Nzizi, EA2. Two wells: Nzizi 1 and Nzizi 2 were drilled in 2006 and 2007 respectively and both discovered hydrocarbons. Nzizi 2 was tested and flowed 14 million cubic feet of dry natural gas.
The above prospects represent less than 6% of the whole Graben. More prospects have been discovered and plans are under way to drill and test them.
Latigo expressed misgivings over the expression "Our Oil" that is used by the Government. This is all an encompassing term - meaning that the oil belongs to the people of Uganda. This is provided for in the Petroleum Exploration and Production Act. It specifically says that: "Without prejudice to the exercise of any right under this Act, the property in, and the control of, petroleum in its natural condition in or upon any land in Uganda is vested in the Government on behalf of the Republic of Uganda."
The draft oil and gas policy has reached an advanced stage having accomplished consultations with various stakeholders. It will be tabled in Cabinet in August. Thereafter, it will be made available to Parliament. In April 2007, some MPs visited Exploration Area 2 where the first oil discovery was made. Plans are underway to organise similar visits for other MPs.
An MP raised the possibility of Parliament having a role in controlling oil proceeds to ensure transparency, citing the case of Norway. In Norway, oil proceeds are controlled by the Ministry of Finance and the Central Bank. The role of Parliament is to regulate the percentage of the oil proceeds to be used to support the national budget. The above arrangement has been extremely successful for Norway.
Rural Electrification
The Government is continuing to pursue the construction of rural electrification schemes. However, due to the need to provide funds to subsidise the high thermal power tariff, the scope of rural electrification has been reduced to focus on projects targeting economic activities, such as fish landing sites like Wakaka, Bukungu, mining areas in Butiru, agro-processing factories like Kayonza, Buhweju, and district headquarters such as Moyo, Moroto and Adjumani, where we are providing new generator sets as we await grid connection.
We are trying to get other companies to manage concessions outside the Umeme concession area. New concessions have come up in West Nile, Kanungu, Kibale, Kikagati and Kasensero will be advertised. This is a business opportunity Ugandans should take advantage of.
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