Total takeover? French oil major firms up plans for region’s energy

Monday February 07 2022
TotalEnergies Uganda General Manager Philippe Groueix and Uganda's Energy Minister Ruth Nankabirwa.

TotalEnergies Uganda General Manager Philippe Groueix exchanges a document with Uganda's Energy Minister Ruth Nankabirwa (centre) in Kampala when the two signed an agreement for an oil project. PHOTO | UGANDA PRESIDENCY PRESS OFFICE


Uganda this week moved a step closer to joining the league of oil producers after global oil majors TotalEnergies and China’s CNOOC signed the final investment decision with the government in Kampala.

The long-awaited move, delayed by a myriad of hurdles, including tax disputes, security, operational and funding challenges and opposition from climate activists, has paved the way for investments towards first oil in 2025.

The progress in the Ugandan projects has given the French oil giant the credence it needs in efforts to firm up plans to increase its footprint on the continent’s energy sector.

Analysts say TotalEnergies is poised to become a major player in the exploration and exploitation of fossil fuels in East and Southern Africa after recently announcing that it was resuming development of natural gas fields in northern Mozambique, which was disrupted by militant insurgency.

But calm has since returned after Rwandan military and Southern African Development Community forces routed ISIS-affiliated insurgents from the troubled Cabo Delgado Province.

Total deals


Incidentally, two days before the Kampala deal on February 1 TotalEnergies CEO Patrick Pouyanne had visited Rwanda, where he announced upcoming energy joint projects with the Kagame administration.

TotalEnergies is creating a commercial juggernaut in Africa that will see it invest billions of dollars in the next five years. The company with operations in at least 14 African countries is looking to invest over $10 billion in East Africa’s energy sector, promising thousands of jobs and major investment opportunities for local contractors.

“Today, we commit to invest $10 billion in the Tilenga and Kingfisher projects and the 1,443km (East African crude oil) pipeline,” said TotalEnergies chairman and CEO Patrick Pouyanne. “In the name of the joint venture partners and on behalf of TotalEnergies, I announce Final Investment Decision for the Lake Albert Development Project.”

The upstream joint venture partners are TotalEnergies with a 56.67 percent stake, CNOOC (28.33 percent) and state-owned Uganda National Oil Company (15 percent).

The oil will be transported through the $5 billion East African Crude Oil Pipeline (Eacop) in which TotalEnergies is a major Eacop shareholder, with a 62 percent stake, while Unoc and the Tanzania Petroleum Development Corporation (TPDC) hold 15 percent each, and CNOOC 8 percent.

The Uganda project was delayed for long due to missed timelines blamed on long drawn-out negotiations between the investors and government over tax disputes and the economics of a refinery versus pipeline.

“FID is the D-Day but, in fact, it is the departure day for our teams to work hard to deliver the projects,” said Mr Pouyanne, adding that from the moment of signing, the project had entered the construction phase and cannot afford to lose another day.

The FID for Lake Albert oil projects signals the growing footprint of TotalEnergies in the oil, gas and energy sectors in Africa, amid various challenges raging from security to bureaucracy.

Last year, the company abandoned its $20 billion natural gas project in Mozambique after an attack by an insurgent group linked to the Islamic States while the project in Uganda has been attacked by environmentalists, prompting some banks to abandon its financing.

After a meeting with Mozambique President Filipe Nyusi a week ago, Mr Pouyanné said the firm was planning to start operations anytime.

“My goal is for the project to restart in 2022. We are ready.”

Mr Pouyanné signed an agreement with Mozambican authorities to train 2,500 young people from Cabo Delgado, with a view to creating jobs from the investments underway.

At the same time, TotalEnergies signed a renewable energy deal with Rwanda, taking its presence on the continent to 14 countries, where the company is keen to deploy its multienergy strategy.

African presence

With presence in Uganda, Rwanda, Kenya, Egypt, South Africa, Mozambique, Nigeria, Angola, Namibia, the Congos, Burkina Faso, Côte d’Ivoire and Senegal, Africa represents 30 percent of TotalEnergies oil and gas production, and 30 percent of its investments.

In an interview with The African Report late last year, TotalEnergies President for Exploration and Production Nicolas Terraz said that in 2020 and early 2021, the company decided to finish the projects that had been launched.

“In Angola, we remain the leading operator, and have initiated Zinia Phase 2, a short-cycle project connected to the Pazflor FPSO floating production unit. In Nigeria, we are continuing with the Ikike project and participating in Nigeria LNG’s seventh liquefaction train. We are more selective in terms of exploration, as our overall budget has been reduced from $1.5 billion in 2019 to $800 million in 2021. In Africa, as of this year, we have three major exploration wells: Angola (Block 48), Côte d’Ivoire (Barracuda field) and Namibia (Venus block). We also plan to explore Block Marine 20, in the Republic of Congo, in the near future.

“In South Africa, where we have made significant offshore gas discoveries in the Brulpadda field [in the southern part of the country], we are currently in discussions with the authorities about marketing gas to meet demand in the Mossel Bay area [between Port Elizabeth and Cape Town], where the state-owned PetroSA liquefaction plant is located.”

TotalEnergies is also involved in solar projects in South Africa, Egypt and Kenya.

In Uganda, besides the Tilenga, Kingfisher and Eacop, which the joint venture partners are investing in, there is a separate private consortium-led $4 billion investment in the 60,000 barrels of oil per day oil refinery at Kabaale.

Rebrand masterstroke

There are also other private sector ventures in infrastructure such as hotels and other facilities to support the oil projects, pushing the total oil-related investments to around $20 billion over the next three to five years, according to Energy Minister Ruth Nankabirwa.

The rebrand from Total to TotalEnergies and its strategy to invest in and roll out renewable energy projects is music to Africans’ ears, especially Uganda President Yoweri Museveni.

“I am happy to hear that Total is no longer about oil but energy in totality, so that we were not using wind for winnowing, or using the sun to dry things but to produce electricity. Now you understand us,” he said during the FID signing in Kampala.

In Kigali, TotalEnergies signed an agreement with the Rwanda Development Board, which will see more electric charging stations installed in the city.

“This agreement illustrates TotalEnergies’ commitment to deploying its multienergy strategy in Africa, particularly in Rwanda, a country with a booming economy,” Mr Pouyanné said at the event witnessed by President Paul Kagame.

The agreement comes as Rwanda looks to increase investment in the energy sector, including electric mobility, with electric cars and motorcycles becoming popular in Kigali.

The agreement with TotalEnergies includes distributing and supplying energy products like cooking gas, developing power storage solutions and natural solutions for carbon storage, and training programmes on new energies and energy transition.

The company will also work with the private sector to improve local investment in clean energy.

“Partnerships with our private sector companies in Rwanda and beyond is timely for a country that puts the environment at the heart of its development strategies. Additionally, the skills transfer in critical areas such as renewable energies and energy transition will undoubtedly contribute to the development of local expertise in the energy sector,” said Clare Akamanzi, CEO of the Rwanda Development Board.

Ernest Rubondo, executive director of the Petroleum Authority of Uganda (PAU) said that this year alone, the total spend during the construction phase will cap at $3 billion, a good portion of which will go to Ugandan companies and other service providers.

“This is a journey Uganda started early, compared to other countries that start talking about national content 10 years or so into production,” Rubondo said, citing a number of companies that have already been subcontracted to offer various services.

Energy value chain

Tanzanian Vice-President Dr Philip Mpango, who represented President Samia Suluhu Hassan in the FID signing, said his country is looking forward to the start of the pipeline, whose construction will account for a 60 percent increase in foreign direct investment to 2025, when the first oil is expected.

Dr Mpango said the pipeline construction will see project cargo of 5,500 tonnes of equipment shipped into Tanzania, with clearing and transportation of the materials to build the pipeline all expected to drive the region’s growth, which had slowed to 2.2 percent due to the Covid-19, compared with an average of 6.7 percent before the pandemic.

According to James Mataragio, managing director of TPDC, the Eacop will build a strong alliance between Uganda and Tanzania, and place the two countries strategically on the energy map and value chain.

“The pipeline gives our countries a position in the global energy discourse,” Mr Mataragio said.

Uganda discovered 6.5 billion barrels of commercially viable resources oil — of which 1.4 billion is recoverable — and 500,000 cubic metres of gas in 2006 in Lake Albert area on the western rift, which separates it from Democratic Republic of Congo.

But the country has progressed slowly towards first oil, setting a number of timelines and missing several targets for FID, which was initially set for 2014, two years after TotalEnergies and Cnooc entered Uganda’s oil sector via a 33 percent purchase each, of Tullow assets.

Permanent Secretary in the Ministry of Energy Irene Batebe said that first oil has been pushed back countless times, but explained that this was partly to put in place the requisite oil legislation and other requirements.

“Uganda’s journey has been steady and measured to make sure that by the time Uganda comes to FID, it is adequately prepared with the legal and infrastructure requirements,” she said.

But industry analysts fault the country’s strategy, mostly pushed by President Museveni to commercialise its oil by refining it locally, as well as driving a hard bargain on tax issues creating disputes between the government and oil companies, for delaying oil production.

Suspended negotiations

In September 2019, Total suspended negotiations on the crude export pipeline following the collapse of Tullow Oil’s farmdown of its stake in Lake Albert oilfields to the French giant, over a dispute in the fiscal treatment of the transaction. It took new efforts, patience and long discussions between the company’s top officials and President Museveni to get the negotiations going again, eventually leading to Tullow’s approval of assets sale.

“I remember for long the night of November 2019, when we remained alone [with the President], and reached agreement that FID will take place,” said Mr Pouyanne.

Responding to criticism over the anticipated impact on the environment the investors say the Albertine projects are premised on low cost and low emissions.

For instance, the cost of finding oil in Uganda is about $1 per barrel compared with the global average of $5, while the cost of producing oil for Tilenga is $11 per barrel — below most countries.

President Museveni scoffed at non-governmental organisations that are opposed to the projects. The activists have targeted the TotalEnergies-led projects saying they lack full disclosure of their environmental and social impact.

Part of Tilenga project is located in Murchison Falls National Park, but TotalEnergies says it will limit its footprint to less than one percent of the area, while the pipeline traverses other wildlife conservation parks, lakes, rivers and will displace over 12,000 families along its route.

Additional reporting by Arnaldo Vieira and Ange Iliza