Aggreko, an energy firm that once operated a couple of thermal plants in Uganda, is the latest company that wants to venture into Uganda's gas industry to produce electricity, The Observer can reveal.
While the company has not applied for a licence yet, it has shown commitment to open talks with Uganda's energy regulator on how it can produce electricity from the gas reserves in the western part of the country. In an email to The Observer, Chamberlain Duruike, the Head of Oil and Gas for Aggreko's operations in Africa, said they were interested in playing a role in Uganda's gas industry.
"We are the only operator able to offer the customers the choice of diesel, heavy fuel oil (HFO) and gas... We would urgently like to open up discussions with them (Electricity Regulatory Authority) on the best way forward," he said.
On what Uganda would get if the company decided to apply for the licence, Chamberlain said: "Aggreko is the world leader in such power projects. Aggreko can provide more generating capacity than the total grid capacity of 170 countries and her global reach means she can respond to rapidly-shifting power demand."
Uganda's oil industry, valued at $150bn, according to the ministry of Energy and Mineral Development, has already sparked off major interest from energy firms looking to develop the gas. Uganda's associated gas could amount to about 190 million standard cubic feet. There are reports that some oil fields will have excess gas supply. Uganda has so far discovered about 3.5 billion barrels of oil. Uganda, whose Gross Domestic Product is $21bn, produces less than 1,000MW of power.
It is not clear how much value is attached to Uganda's gas reserves, or the amount of electricity that can be produced from this. Although, reports indicate that the gas is enough to power a 50MW power plant for 30 years. Energy firms have been flocking the Electricity Regulatory Authority's offices with grand plans on the kind of investments they are willing to make to produce power using gas.
Norway's Jacobsen Elektro Holding was the last company to ask for a licence less than five months ago. Together with Aggreko, the two would become the biggest energy players in Uganda's gas industry if they finally received licences. The companies that applied for licences earlier this year include: Albatros Energy Uganda Limited and Lake Albert Infrastructure Services Limited.
Jacobsen said it wanted a licence to produce 100MW of power. The company, which already has a 50MW thermal power plant at Namanve, wrote in its licence application of how the three major oil companies - Tullow, Total and Cnooc - had determined Uganda's gas reserves to be higher than earlier anticipated.
"In order to enable production of the oil in ground, a sustainable solution is required to be in place for the handling of the associated gas. In addition, we are informed by the oil companies and PEPD that reinjection of the associated gas back into the well is impossible due to the nature of the shallow oil structures," Jacobsen writes in its licence application, which is dated March 2014. It goes on to add: "As a result the only sustainable, stable and environment-friendly solution will be to use the associated gas as fuel for power generation."
Jacobsen, which is also developing the 6.7MW Nengo Bridge hydro power plant, said its project would not just use gas.
"Following discussions with the oil companies and PEPD (Petroleum Exploration and Production Department) it is likely that the power plant should also be able to utilize other fuel types than associated gas, namely fuel (local crude oil and local heavy fuel oil)," Jacobsen wrote.
The power plant will be built according to how the oil companies develop the oil fields.
"It is anticipated that the power plant would be built in stages to match the needs of the oil companies and GoU to handle the associated gas in accordance with the expected production profile. The implementation of the project will, therefore, need to be closely coordinated with GoU and the oil companies," according to Jacobsen.
Jacobsen said it would form a special-purpose vehicle to undertake the power project. The cost of the project will be $170 million, funded with a combination of debt and equity. The Norwegian Guarantee Institute for Export Credits will fund the project to a tune of $145.5 million as debt, covering 85 per cent of the total project cost.
It is not just Jacobsen that is talking big money; Lake Albert Infrastructure Services Limited, whose parent company in Uganda is EleQtra, said it would spend $87 million to develop its 52MW gas plant. Albatros Energy, which is to put up a 230MW power plant using crude oil, does not mention how much money it will spend.
The company says it will need 690,000 barrels of oil per year - about 1,900 barrels of oil per day - to keep the power plant running for at least a decade.Other private firms have shown interest in buying Uganda's heavy fuel oil to produce their own power. Kasese based Hima Cement is one of them. Electromaxx, which produces less than 50MW in Tororo, had also previously said it would consider buying heavy fuel oil if it ever became available for sale.
In September last year, after Chinese firm Cnooc received a production licence for the Kingfisher field, Peter Lokeris, the minister of State for Energy, offered more information on Uganda's plans for its gas.
"Cnooc Uganda Limited 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...," he said.
Some of the options Cnooc was supposed to study included transportation of the excess gas to Kabaale refinery area for power generation; setting up of facilities to produce liquefied petroleum gas (LPG); and onsite generation and export of power from the Kingfisher field.
Estimates indicate that Kingfisher alone, which is one of the biggest oil fields in Uganda, has enough gas to power a 50MW plant for at least 10 years.
The gas reserves will only be developed at the same pace as developments in the oil industry. However, there are still delays in Uganda's progress towards becoming an oil producer.
Only Cnooc has received a production licence. Tullow Oil submitted a couple of licence applications but none has been issued todate. The government was supposed to have chosen the lead investor for the refinery by June this year, but even that has not yet happened.