Optimism high in oil sector

At the annual Oil and Gas Convention held at Kampala Serena Hotel from April 17-18, it was the usual cheers and chest thumping from those at the forefront of Uganda’s petroleum sector; Ministry of Energy, the Big Oil companies, the regulators, service providers, and everyone else who has positioned themselves to tap into the fast growing sector.But amidst all the euphoria and high sounding statements was the elephant in the room – the long awaited production of First Oil – which has been a moving target for years since Uganda discovered commercially viable oil in Lake Albert 2006.

The Oil and Gas Convention was organised by the Uganda Chamber of Mines and Petroleum and this was the ninth edition. The theme was “The Journey to First Oil in the Face of Energy Transition in Uganda.” The purpose of the convention is to bring together industry players to deliberate on sector opportunities and to provide updates on projects.But to some observers, the convention is turning out to be smoke and mirrors for as long as Ugandans are yet to see the flowing of first oil even when 2025 appears to be the set date for the milestone.

Endless conferences and glitzy events like the signing of the Final Investment Decision in 2022 for flagship oil projects have done little to tamp down the skepticism around Uganda’s oil prospects among some sections of the public. But for those running the show, the optimism remains high.The praise for Uganda’s oil journey was led by Ruth Nankabirwa, Minister for Energy and Mineral Development, who used the analogy of pregnancy to drive her point home. “We have no option but to push,” she said to a packed audience at the Serena.

Elly Karuhanga, former President of Tullow Uganda, a subsidiary of the British oil company that was involved in the initial stages of oil discovery, gave an impassioned account of Uganda’s journey with oil from almost twenty years ago.For people like Ernest Rubondo, the Executive Director of the Petroleum Authority of Uganda (PAU), who has been longer in the sector than the minister, there is no relenting. “The International Energy Agency reports that global upstream oil and gas investments (investments in looking for and producing oil and gas) increased by about 11% to $528bn in 2023, the highest level since 2015,” he remarked.

Rubondo added that Equinor, a Norwegian oil company, is investing $6bn annually in exploration aimed at maintaining a steady levels of production till 2035. Norway is one of the largest oil producers globally.“Therefore the exploration, development and production of Uganda’s oil and gas resources is not an isolated case in the world as some activists have tried to portray but more importantly, it is being aligned to the requirements of a just energy transition.”

Energy Transition

Amidst the global debate on the energy transition and in line with the theme of the convention, Uganda launched its energy transition plan at the COP28 climate summit in Dubai, United Arab Emirates last year.The transition plan is a commitment to provide universal electricity access to 45 million Ugandan citizens by 2030 and introducing cleaner cooking solutions. This would mean doing away with reliance on charcoal and firewood which powers the bulk of Ugandan homes. The lofty goal aside, Ugandan experts stress that a just energy transition does not mean doing away with production of oil.

“Practically, fossil fuels are not the problem, the greenhouse gas emissions from the production and combustion of fossil fuels to generate electricity, heat and for transportation is the real problem in the war against climate change,” Joseph Kobusheshe, the Director Environment, Health and Safety at PAU.“Therefore, rather than focus on abandoning exploration, development and production of oil and gas which has been to provide reliable energy, more can and should be done to decarbonize the production and use of oil and gas and to work towards a net zero carbon petroleum industry.”

In his speech, Rubondo said that putting the Just Energy Transition in context means appreciation of the energy challenges in Africa where 600 million people lack electricity and 970 million lack clean cooking fuel.“For developing countries, the United Nations indicates that achieving the energy transition would cost a combined total of about $5.8trn annually from 2023 to 2030 which is an average 19% of the developing countries’ GDP or about $1271 per person, he said.

Rubondo added that it was impossible for countries like Uganda to meet this financial obligation overnight. “It is also worth noting that the fossil fuel sector, had by 2018, invested an estimated $25trillion in infrastructure globally therefore abandonment of such assets needs to be handled fairly and in a just manner.

The optimism is in the oil sector is driven by the deals being made. PAU has handed out contracts worth $7.1bn since the announcement of the FID two years ago. About $1.8bn has been scooped up by Ugandan firms. These are services for camp management, drilling, waste management, warehousing, etc.

Total, CNOOC activities

An official from TotalEnergies summed up the company’s activities at the Tilenga project in Buliisa district in three components; enabling infrastructure, drilling wells and EPSC (Engineering, Procurement, Supply, Construction and Commissioning).A representative from China National Offshore Oil Corporation (CNOOC) said the company was delivering solar turbines to its Central Processing Facility and carrying out green field development activities and also training government officials in various technical aspects.

Uganda National Oil Company (UNOC) is busy with the Crude Oil Export Hub which is responsible for interfaces with all the other players. Michael Nkambo Mugerwa, the General Manager Uganda Refinery Holding Company (URHC), revealed at the convention that Kabalega International Airport will be fully operational by August 2025. URHC is a UNOC subsidiary, and is in charge of the Kabalega Industrial Park (KIP) in Kabaale, Hoima.