Drilling into new ventures

The government is actively working to accelerate growth in the oil and gas sector

With sizeable oil and gas reserves, enabling regulation, and a proactive national oil company that prioritises local participation, inclusivity, and capacity building, the country is positioning itself as a force to be reckoned with.

Despite representing a relatively new hydrocarbon sector, Uganda – with its 6.5 billion barrels of proven crude oil reserves and 0.5 trillion cubic feet of natural gas – has made significant progress in establishing a competitive oil and gas industry. Under the leadership of President Yoweri Museveni working together with Ernest Rubondo, Executive Director of the Petroleum Authority of Uganda, and Proscovia Nabbanja, CEO of the Ugandan National Oil Company, Uganda has accelerated hydrocarbon exploration, large-scale project developments, and regional synergies, driving widespread socio-economic growth in the process.

Uganda boasts participation by some of the world’s leading International Oil Companies (IOC). Since 2004, Tullow Oil has played a pivotal role in developing Uganda’s oil and gas sector, with significant discoveries made in the Lake Albert Rift Basin in 2006 and 2009. Similarly, Heritage Oil Plc. has been a major contributor of Uganda’s industry success through discoveries such as the 600-million-barrel drilling campaign in the Albert Basin and the Kingfisher Well in 2008. Both companies have been instrumental in opening up several basins in the country, accelerating associated developments and establishing a competitive sector. In 2020, Tullow sold its assets to Total, which, in collaboration with China’s CNOOC, has been driving growth across the entire value chain.

Although the participation of IOCs have been valuable in expanding Uganda’s sector, it is the active participation of the UNOC that has positioned the country as a regional competitor. Notably, the UNOC, whose overall function is to manage the government’s commercial interests in the petroleum sector and ensure resources are exploited in a sustainable manner, has played a significant role in driving progress. Even throughout the Covid-19 pandemic, whereby price and operational impacts hindered progress, the UNOC has not only managed to sustain operations, but excel.

Under the guidance of President Nabbanja, the UNOC has overseen a range of projects across the entire energy value chain. In the upstream sector, notable projects include the 40,000 barrel per day (bpd) Kingfisher Project; the 190,000 bpd Tilenga Project; as well as the exploration of new ventures in the country’s second licensing round. In the midstream sector, projects include the Kabaale Industrial Park – comprising the country’s second international airport, a crude oil export hub, and the Uganda refinery - the 60,000 bpd Uganda Refinery Project; and the monumental 1,443km, 216,000 bpd East Africa Crude Oil Pipeline (EACOP) – connecting Kabaale-Hoima in Uganda with the Chongoleani peninsula near Tanga port in Tanzania. Finally, downstream projects include downstream petroleum trading; the Jinja Storage Terminal; and the Kampala Storage Terminal – which will serve as regional pipeline hub.

Meanwhile, in addition to playing an active role in the sector, the UNOC and the Ministry have placed a focus on domestic capacity building through the emphasis of women inclusivity, local company participation, and the transfer of skills from IOCs to local companies. Projects such as the EACOP present the unique opportunity for local companies to actively participate in the country’s oil and gas sector, not just as commission agents, but as active participants. By seizing the opportunities brought about by the EACOP, and targeting partnerships and joint ventures with regional actors, local companies will be enablers of a successful oil and gas industry in Uganda.

With the East African Oil Pipeline project recently getting the go-ahead, Uganda is set to produce its first oil as early as 2025 and production in the next five years is expected to jump to 230,000 barrels per day, from zero in 2021, says GlobalData, a leading data and analytics company.

Conor Ward, Oil & Gas Analyst at GlobalData, comments: “The Lake Albert oil development in Uganda will be one of the largest oil developments seen in Africa in the last 20 years, expecting to recover over 1.5 billion barrels of oil. The Tilenga and Kingfisher fields (part of the Lake Albert development) will bring significant value to the government of Uganda and the two fields alone could generate up to $8bn in fiscal revenues.”

Source: APO and World Oil