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Uganda: Country Begins Market Survey for Oil
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East African Business Week (Kampala)
10 March 2008
Posted to the web 10 March 2008
Edris Kisambira
Kampala
Even before commercial quantities of Uganda's newly found oil are determined, a top official in the petroleum exploration and production department has said studies have commenced to find out the region's oil demands.
Popular belief is that you cannot engage in a study of that kind unless you know the actual reserves but initial results, which show that there could be close to a billion barrels of oil, have convinced the authorities to go ahead with such a study.
"Studies are being done to find out the exact demand for oil in the region to be able to export," Mr. Reuben Kashambuzi, the commissioner petroleum exploration and production department told the northern corridor spatial development programme meeting in Kampala.
The meeting was called to achieve consensus amongst stakeholders on the idea that there is a significant regional economic development opportunity that could be realised if the existing northern transport corridor was to be transformed into a development corridor.
Kashambuzi did not give details about the study but took the delegates, who were drawn from around the Great Lakes region, through Uganda's oil prospects so far. Kashambuzi presented a paper titled "the petroleum potential of the Great Lakes region, a key ingredient to the proposed northern development corridor."
Two prospecting companies; Heritage Oil of Canada and Tullow Oil of the UK have made discoveries, with the first one having been made in 2006.
The first discovery at Mputa has since followed by eight drilled oil wells.
The Kingfisher well by Heritage Kashambuzi said has flowed the largest (close to 14,000 barrels of oil per day). He said that the flow tests indicate the potential is there but cautioned that the test figures should not excite people simply because there are other indicators that have not yet been looked at.
He said that the discoveries Uganda has made are unprecedented. He said there has been tremendous success because of all the eight wells, there has not been a single one where hydrocarbons have not been found.
Estimates indicate there is some 300 million barrels at Kaiso Tonya while the Kingfisher well could hold in excess of 500m barrels.
It is the Ngassa prospect, whose drilling was suspended two weeks ago that could hold more oil if hydrocarbons are found there. "If we find enough hydrocarbons in the Ngassa prospect, the prospect would be much larger than what we have so far discovered," Kashambuzi said.
The discovery of oil in the Albertine Graben on the Uganda side (not to mention the potential on the DR Congo) and many other factors is justification that the northern corridor has both inherent economic potential.
Through regional groupings like the EAC and COMESA, a development corridor initiative can be persued through the joint exploitation of the abundant natural resources which include, but are not limited to mineral deposits, oil and gas, fertile soils and tourism.
Aside from oil so far discovered in Uganda, Sudan, which is part of the northern corridor has proven reserves of oil totaling 5 billion barrels, natural gas has been discovered in Tanzania while Rwanda has 50 million cubic metres of methane gas in Lake Kivu.
Although no oil has been discovered in Kenya, exploration licenses so far handed out by government is an indication that Kenya's coastline has oil-holding rocks while oil seeps have been detected in the Lake Turkana area.
Already, there is substantial trade among the northern corridor countries. In 2005, the value of trade was approximately US$1.3 billion.
In terms of volume, this has been estimated to be more than 3 million tonnes per annum. In addition, the trade of the Northern Corridor countries to and from overseas markets and passing through the port of Mombasa has steadily been increasing at the rate of over 7% per annum, rising from 10.5 million tonnes in 2002 to 14.5 million tonnes in 2006.
It is estimated that trade through the Mombasa port will exceed 20 million tonnes within the next five years. About 30% of this trade will originate or will be destined to the landlocked countries of the northern corridor.
The spatial development initiative approach will require the northern corridor countries to adopt bold measures. Such measures will include the willingness to jointly sponsor and to implement regional anchor projects.
Another challenge will be the need to develop strong public private partnerships, as the vehicle for the actual transformation of the corridor into a development corridor.
At the outset, the challenge to tapping the potential of the corridor is the lack of requisite infrastructure.
Projects like the East Africa railway mater plan and the Eastern Africa power pool as well as building the roads of East Africa would go a long way in addressing the infrastructure bottlenecks to turning the transport corridor into something bigger.
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Kashambuzi pointed out the challenges transforming from a transport corridor to a development corridor among them the need to harmonise policies, laws and regulations, infrastructure ownership, lack of capital to invest in required infrastructure, poor infrastructure and fact that prospective oil basins are under-explored.
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