On Sept. 25, 2013, Acting Energy and Mineral Development Minister Peter Lokeris announced the handing over of the country's first oil production licence to the Chinese company CNOOC Uganda Ltd for the development of the Kingfisher Oil field. This is an abridged version of his speech.
On Sept.16, 2013, the government lifted the condition on the Production License for the Kingfisher (Kajubirizi) Discovery that was issued on Feb.03, 2012. This marks an important milestone in the progress of Uganda's Oil and Gas Sector. The Kingfisher Production License is the first oil and gas production license to be issued in the country.
You will recall that oil companies have in the past been granted exploration licences to undertake exploration for oil and gas in the country. It is an achievement for the oil and gas sector and the country at large that the efforts carried out under the tenure of the Exploration Licences in the country are now maturing into the development phase of the petroleum value chain and progressing towards production.
The Albertine Graben, which is the most prospective area for petroleum production in Uganda, is currently subdivided into 17 Exploration Areas (EAs). Four of these (EAs 1, 1A, 2 and Kingfisher Development Area) are licenced to four oil companies namely; Tullow Uganda Operations Pty Ltd, Tullow Uganda Ltd, Total E&P Uganda B.V. and CNOOC Uganda Limited. These companies hold the four licences in joint partnership and have rights to undertake petroleum exploration, development and production in these areas.
The Kingfisher Development Area is jointly licenced to Tullow Uganda Ltd, Total E&P Uganda B.V. and CNOOC; with each having equal shareholding. The government plans to participate in this license with a 15% interest and this participation will start upon commencement of production.
As referred to above, a conditional production license over the Kingfisher Field was issued to Tullow Uganda Ltd in February 2012. The condition was for the licensee to submit an amended and restated Field Development Plan (FDP) and Petroleum Reservoir Report (PRR) acceptable to the government, in accordance with the Petroleum Act and International Petroleum Best Practices. Subsequent to Tullow's farm down of 66.6% of its assets in the same month, CNOOC was appointed and approved as operator of the Kingfisher Discovery Area.
On Nov.12, 2012, CNOOC submitted a revised Field Development Plan and Petroleum Reservoir Report to the government, which have been extensively reviewed. The Field Development Plan and Petroleum Reservoir Report were agreed and the condition on the grant of this Production License lifted thereby marking the entry of Uganda into the development phase of the Petroleum Value Chain. Uganda is indeed on a steady and sure path towards commercial production of its oil and gas resources.
The in-place oil in the Kingfisher field is estimated at an average of 635 million barrels, of which 196 million barrels are estimated to be recoverable. The field will be developed to produce between 30,000 - 40,000 barrels of oil per day (bopd). This production rate will be firmed up by further studies which will be undertaken during the development of this field. This planned production is expected to be achieved by drilling 40 development wells, which will include 27 producers and 13 injectors.
The production of oil from the Kingfisher field will also lead to production of associated gas. Some of this gas will be used to generate electricity for operating the facilities in the field. CNOOC will undertake studies to determine the optimum solution for the
utilisation of the gas that will not be used to generate power for the operations in the field (excess associated gas) and the options to be studied will include:
(i) Transportation of the excess gas to Kabaale refinery area for power generation;
(ii) Setting up of facilities to produce liquefied petroleum gas (LPG); and,
(iii) Onsite generation and export of power from the Kingfisher field.
The most technically feasible and economic option will be adopted for the utilisation of the excess associated gas.
Developing the Kingfisher field is estimated to cost over US$ 2.0 billion to be spent over the development period of four years. This cost will cover; pre-development activities including Front End Engineering and Design (FEED), Engineering Procurement and Construction (EPC) selection, ESIA, and land lease acquisition; facilities including Central Processing Facility (CPF), pipelines, access roads to facilities in the field, airstrip, and permanent camp; development wells; and an abandonment fund.
As you are aware, the Kingfisher field is located in Buhuka Parish in Kyangwali sub-county, an area which is currently only accessible by going over Lake Albert. I am glad to inform you that as part of the development of the Kingfisher oil field, a 7KM road from Ikamiro Village to Buhuka Parish in Kyangwali Sub-county, Hoima District, will be constructed.
In addition to road construction, there will be need to evacuate the crude oil upon commencement of production. The development plan provides for this evacuation to be done by pipeline. A 50 Km crude oil pipeline will therefore be constructed from Buhuka to the Kabaale
refinery area. The plan is to develop a 60,000-barrels of oil per day refinery starting with 30,000 BOPD refinery, which will be in place by 2017/2018.
The government is also in discussions with the licensed oil companies regarding the development of a pipeline to export the crude oil not used by the refinery. Therefore, as CNOOC takes forward development of the Kingfisher field towards production of oil, the government will also be taking forward development of the refinery and other attendant infrastructure so that both projects can be completed at the same time and the crude oil produced from this field can be refined to produce petroleum products for the country.
As you are also aware, the country has adopted laws that promote the participation of Ugandans and Ugandan entrepreneurs in the country's oil and gas sector. In this regard, CNOOC will endeavour to maximise the utilisation of Ugandan companies, personnel and resources in supporting the development and production operations of the Kingfisher oil field. The company will also motivate non-Ugandan companies who will be sub-contracted for this development to use Ugandan goods and services by incorporating national local content requirements into their tendering process as well as encouraging joint ventures or consortiums with local companies.