The last quarter of 2016 saw new vigour in the oilfields as the government issued licences to oil companies, setting the stage for activities that will lead to production.
The accelerated activities include technical work in the fields, construction of a pipeline, a refinery and two central processing facilities (CPF).
A CPF is a huge plant and a first point where unwanted matter is separated from crude and gas before being transported to a refinery or pipeline. The planned CPF will be located in the north and south to cater for crude produced in those regions.
The construction phase is expected to span three to five years after completion of front end engineering design (FEED), which takes 12 to 18 months. These activities are expected to attract huge foreign direct investment.
Discourse now changing
Energy Ministry officials said that $3 billion has been invested in the exploration and appraisal phase, and between $16 billion and $20 billion will be invested in the production phase.
The discourse is now changing to how the communities will benefit from expected huge revenues.
“We are looking now at reviving the industry because the global prices are rebounding, so we should be preparing to take the opportunities that the industry presents,” said acting director of petroleum Robert Kasande.
The licensees are joint venture partners Total E&P Uganda and Tullow Oil Uganda, who were given eight licences. Their partner, China National Offshore Oil Company (CNOOC), was issued with a production licence for Kingfisher well in 2013. CNOOC has been undertaking development activities and its FEED is ready, so Kingfisher is expected to be the first field to come on stream.
The licensed areas contain 5.4 billion barrels of the overall discovery volume of 6.5 billion barrels.
The government is in negotiations with three companies before signing a Production Sharing Agreement for exploration in new blocks.
With high value contracts obviously going to international service providers like rig hire services owing to high level of professionalism and capital required, the country has decided to ring-fence certain services to retain some of the money within the economy.
Under the proposed National Content Policy that is awaiting Cabinet approval, 20 service sub-sectors, including catering, security and transport have been set aside for local companies.
Besides that, companies are required to advertise for any contract above $500,000 in the local media.
The oil companies are unhappy about the government’s regulation of local content while the Association of Oil and Gas Service Providers believe that the definition of local company is wanting.
The policy defines a local company as one registered in Uganda, employing 70 per cent Ugandans and using locally produced material. This means that foreign companies can qualify as local if they meet these conditions. The government is training technicians to be deployed during the construction phase.