Sam Jumbwike

Sam Jumbwike

First Oil Delivery Certain No More For Uganda

President Yoweri Museveni in a speech read by his Prime Minister Ruhakana Rugunda at  4th Uganda International Oil and Gas Summit at the Kampala Serena Hotel reassured Ugandans and the world that Uganda is ready for first oil.

President Museveni’s however were more targeted to the investors than the local population. He assured the investors that all major decisions have been made to facilitate oil production.

The president tasked government to clear any obstacles so that investment development can move smoothly. “ “I want to re-assure you all that Uganda is ready for business.  We value investors. People who bring capital create jobs and bring revenue for the state."

While the President was positive and assuring everyone of Uganda’s readiness for first oil, media reports were quoting Ministry of Energy and Mineral Development officials including ministers that first oil is far from near.

If comments made by the ministry officials in the recent days are anything to go by, Uganda can’t say for sure when the country will start producing its much awaited natural resource.

The much hyped 2020 target for delivering first oil is as things are going now untainable. While last year government officials were convinced it could be achieved, now they are coy.

Uganda confirmed commercially viable crude oil and gas deposits in 2006 but for one reason or another has struggled to let the hydrocarbons pop out of the ground.

Construction delays for major support infrastructure projects and unfinished key industry studies to inform key investment decisions have curtailed this ambition.

Government and the oil companies are carrying out various Front-End Engineering Design (FEED) whose finding will help to arrive at important investment decision especially for infrastructure projects like the refinery, crude export pipelines, central processing units and storage facilities.

Energy Minister Eng. Irene Muloni told media last month that FEED for the oil refinery was just starting and would have an impact on the completion of the refinery. Many industry spectators expect refinery construction to begin in 2022.

In April this year, Uganda signed a long term Project Framework Agreement (PFA) with a foreign consortium, Albertine Graben Refinery Consortium (AGRC), to expedite construction of the country’s 60,000 barrels per day refinery.

There is no big news coming out of the East African Crude Export Pipeline project ever since President Museveni and President John Pombe Magufuli of Tanzania teed off the construction of the 1,445 km crude pipelin in Hoima last year.

The success of refinery, crude pipeline, the refined products pipeline, the airport in Hoima and many other infrastructure projects to facilitate oil production is vital in government and oil companies to reach the Final Investment Decision.

Any delays affecting these projects affects FID and of course first oil. Quoting the energy ministry, New York  based Bloomberg reported that joint-venture partners Total SA of France, China’s Cnooc Ltd. and London-based Tullow Oil Plc failed to reach the much needed Final Investment Decision.

The failure to reach Final Investment Decision has affected achievement of first oil which had been set to happen in 2020. In an email interaction with this magazine, Total said they ‘steadily progresses towards the achievement of a Final Investment Decision in 2018 and towards 1st oil about 36 months later’.

 

 

 

 

West Africa Operations Facilitating Tullow’s Strong Progress

In a Trading Update for the period raning from 1 January to 25 April 2018 released on Wednesday, British oil firm Tullow Oil reported that it is experiencing a strong progress in 2018 and continues to generate free cash flow.

This positive progress is largely facilitated by their operations in West Africa, specifically in Ghana where drilling programme at the TEN and Jubilee fields ‘are underway’ and will ‘remain on track to deliver on our existing production guidance,’

An optimistic Paul McDade, Chief Executive Officer, Tullow Oil, said their Ugandan and Kenyan developments are on track with a Final Investment Decisions expected this year and another in Kenya next year.

“We are preparing for the start of our multi-year exploration programme across our diverse portfolio of exploration prospects in Africa and South America,” McDade said.

Adding: “The progress we have made is due to the hard work and financial discipline of the team and the support of our shareholders, allowing us to focus on growing our business and delivering returns.'

The Tullow Group which is holding its Annual General Meeting (AGM) in London is expected to announce its Trading Statement and Operational Update on 27 June 2018 and Half Year Results will be announced on 25 July 2018.

Highlights from trading update

  • Strong production at TEN in Ghana and across our non-operated portfolio delivered average first quarter net oil production of 87,700 bopd, including production-equivalent insurance payments. Full year guidance remains 82,000-90,000 bopd
  • Drilling of first new production well on the Ntomme field in TEN is under way; contracting of second rig is under review; first shut-down to stabilise turret bearing at Jubilee FPSO completed successfully
  • Progress towards Final Investment Decision (FID) in Kenya in 2019 continues; upstream and pipeline Front End Engineering Design (FEED) and Environmental Social Impact Assessment (ESIA) work progressing to plan
  • Uganda farm-down to Total and CNOOC awaiting Government approval; Lake Albert development progressing towards FID in the second half of 2018
  • Exploration team continues to mature prospect inventory and drill queue for three-year exploration programme, which will start with the drilling of the Cormorant wildcat well, offshore Namibia, in the third quarter of 2018
  • Successful issue of $800 million of senior notes due 2025 further extending debt maturities; voluntary cancellation of $150 million of commitments under the Revolving Corporate Facility (RCF), further optimising balance sheet
  • Net debt reduced to $3.4 billion at 31 March 2018; current headroom and free cash of approximately $1 billion
  • 2018 capex forecast of $460 million remains unchanged; Uganda expenditure of $110 million expected to be repaid following completion of Uganda farm-down

Chinese University To Start Oil Institute At Makerere

China University of Petroleum (CUP) signed a Memorandum of Understanding (MoU) with Makerere University that will lead to the establishment of an oil institute at the college of natural sciences, New Vision, a local newspaper reported last week.

Barnabas Nawangwe, according to the newspaper, said the MoU was signed in December and that implementation of areas of collaboration has started. “The MoU will see the two universities mobilise funds to start the petroleum institute,” Nawangwe said.

Nawangwe made the remarks while meeting a delegation of seven officials from CUP on Thursday. He said the financial details of the MoU will come out at a later stage. The universities will also collaborate in the areas of staff and student exchange; joint research and organising conference activities, he added.

Is Government Failing To Manage Ugandans’ Expectations From The Oil Resource?

Two years after announcing the discovery of commercial Oil Reserves in Uganda in 2006, the Government of Uganda came up with the National Oil and Gas Policy of 2008 through which it sought to utilize the newly found Oil resources to contribute to early achievement of poverty eradication and create lasting value to society.  

Oil raised the expectations of so many Ugandans as they started envisioning the petro-dollars that would flow into the country to fix the financial gaps that the country had been grappling with for generations.  Government’s remedy for managing these expectations was to have constructive dialogue with all the stakeholders in order to reduce anxieties arising from the expectations.

Ten years down the road, more oil deposits have been discovered and the recoverable oil now stands 1.5 billion barrels. Giant Oil Companies like Total, CNOOC and Tullow Oil entered into Uganda and have made huge investments in Uganda’s Oil Sector. Government has already reaped around USD $ 300,000 from Signature Bonuses and millions of dollars from taxes arising out of Tullow’s acquisition of Heritage’s interests in Uganda, and Tullow Oil’s farm down to CNOOC and Total.

Government’s potential share of the oil resource after oil companies have recouped their costs stands at a whopping US $50 billion and Government has already indicated it to Ugandans that Uganda will reach the Middle Income Status in the next decade.

However, from public opinions, Ugandans’ expectations from the Oil seem to be dwindling every other passing day.  A decade after discovery, the oil is yet to be drilled from the ground, the Oil refinery has not yet been set up and the pipeline to transport the crude oil is yet to be built. Earthfind’s Sam Jumbwike engaged a number of Ugandans about and they shared about their expectations from the Oil.

Mariat Nasasira-Radio Presenter, Galaxy FM

 

The truth is that I stopped expecting anything from this Government. I have zero hope in our Oil. Under different circumstances or different Government I would expect to see an improvement in infrastructure, better roads and hospitals, more jobs, reduced fuel prices and gas prices for those of us who use it to cook. And of course a reduction in the country's dependence on foreign donors. Unfortunately with the kind of corruption and poor governance in place, that seems like just a dream.

Maureen Kyalya Waluube- Former Presidential Candidate 2016

I expect nothing from the Oil as long as we still have NRM in Uganda. All profits are going to build Rwanda not Uganda

Fred Musisi Munagomba- Director, Creative Options

 

Actually, I don’t expect anything good to come out of the Oil resource because I don't trust the leadership. The oil money will be stolen and nobody will be apprehended.

Mutebe Henry-Ugandan Student in Norway

I want to be optimistic. I am hopeful that the oil money will change fortunes for Ugandans but this can only be achieved by more increased transparency, accountability and sound investment of the oil money. Countries that have done well like Norway invest about 60% of their oil money into equities in well developed markets like the US, UK/euro area, Germany, Japan among others. I would be very proud if our country had shares in companies like Apple, Microsoft and Nestle.

 

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