22 February 2017

Uganda Inches Closer to Oil Production By 2020

Photo: Daily Monitor
Uganda’s oil: Commercial discoveries of oil reserves have been made in a number of areas including, but not limited to, Butiaba, Ngassa, Kaiso-Tonya, Kingfisher, among others. Despite Tullow Oil’s numerous contribution towards these discoveries, the oil firm has started to ease out of Uganda through sale of its stake.

Partners in Uganda's oil and gas are closer to making a final investments decision following the announcement that three companies will be involved in technical studies for upstream development. This brings optimism that the country could draw its first oil on schedule in 2020.

In August 2016, the Ministry of Energy and Mineral Development issued eight production licences to Joint Venture partners Total E&P Uganda and Tullow Oil Uganda, adding to the one given to China National Offshore Oil Company.

Excitement among government officials and the oil companies executives was palpable last week when the announcement on technical studies was made. Energy Minister Irene Muloni and oil executives toasted at a ceremony at Kampala's Sheraton Hotel.

The licensed areas have 5.4 billion barrels of crude out of the overall discovery volume of 6.5 billion barrels. Officials say this amount is just a quarter of the country's potential hydrocarbons. The fields, however, will not come on stream at the same time.

"The companies are expected to work towards reaching a final investment decision within 18 months after issuance of the production licences and first oil in the year 2020," said Ms Muloni during the ceremony.

"We can deliver the project in 2020. We feel it is achievable but we need all stakeholders to deliver," said Total's general manager, Adewale Fayemi.

The study, Front End Engineering Design (FEED) is for the Exploration Areas (EA1, EA2) in Buliisa district.

"Joint Venture partners have up to December 31, 2017, which is when we expect them to make final investment decision," said Ms Muloni.

The Joint Venture partners have contracted Fluor from France, which is partnering with China's China Petroleum Engineering and Construction Corporation. Others are: Technip from France and Chicago Bridge &Iron Company based in the US, but with offices in UK. The companies were selected through a competitive process that attracted 40 companies.

However, after six months of the initial design, the two best performing companies on FEED contract will be invited to compete for next phase -- Engineering, Procurement and Construction (EPC) without going through another fresh bidding process as the case has been.

EPC is a phase where a contractor is made responsible for all the activities from design, procurement and construction to commissioning and hand over. Thereafter final contractor will be selected to move other process forward. The contractor will also be required to establish a 200,000 bop Central Processing Facility.

Other activities including environment and social impact assessment, land acquisition, contracting, drilling and well services are ongoing. In addition, implementation activities for King Fisher and East African Crude Oil Pipeline are on progress.

On January 9, Tanzania, Uganda and oil joint venture partners agreed that all activities leading to the first oil production will be done concurrently. To that effect, the parties launched FEED study on the 1,445km long pipeline running from Hoima in western Uganda to Tanga port in Tanzania.

However, the process to identify the lead refinery investor is still ongoing. According to Ms Muloni, the process is expected to be concluded in March.

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