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’.

 

 

 

 

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