Uganda’s Oil and Gas Sector: A Mid-Year Progress Update

The Minister of Energy and Mineral Development, Dr. Ruth Nankabirwa Ssentamu, provides a comprehensive update on the progress of Uganda’s oil and gas sector during a mid-year media briefing.

Highlighting the country’s commitment to transparency and accountability, Dr. Nankabirwa outlined significant advancements in major projects such as the Tilenga and Kingfisher developments, the East African Crude Oil Pipeline (EACOP), and the Uganda Refinery project.

She emphasized the substantial investments made in these projects, totaling approximately $20 billion, and discussed ongoing efforts in exploration, development, and local content integration.

Below is the Minister’s detailed speech;

” MEDIA BRIEFING ON THE PROGRESS OF UGANDA’S OIL AND GAS SECTOR

BY HON. DR. RUTH NANKABIRWA SSENTAMU

MINISTER FOR ENERGY AND MINERAL DEVELOPMENT

21^st AUGUST 2024

KAMPALA, UGANDA

INTRODUCTION

1. Ladies and gentlemen, it is my pleasure to welcome you to this mid-year media briefing on the ongoing developments in Uganda’s oil and gas sector. This second briefing during the year 2024 is a testament to our unwavering commitment to transparency and accountability, in line with the principles of the Extractive Industries Transparency Initiative (EITI).

UGANDA’S FLAGSHIP OIL AND GAS PROJECTS

• Following the landmark Final Investment Decision announced in 2022 by the joint venture partners—TotalEnergies E&P Uganda, China National Offshore Oil Company (CNOOC) Uganda Ltd, and Uganda National Oil Company (UNOC)—Uganda’s vision for harnessing these resources is steadily materializing.

• The projects include the Tilenga and Kingfisher projects in the Upstream sector, with investments upwards of US $6 billion, alongside the East African Crude Oil Pipeline (EACOP) valued at US $5 billion, and the Uganda Refinery project, estimated at US $4 billion, both in the Midstream sector.

• Together with the Government’s investment in supportive infrastructure, and a renewed focus in exploration for additional oil and gas resources, these projects represent a substantial investment of approximately US $20 billion into Uganda’s economy.

• I am, therefore, delighted to present to the public key highlights of the progress of the development of Uganda’s key oil and gas projects.

THE UPSTREAM

Exploration

• The Government continues its efforts to make new discoveries and enhance our current petroleum resources, which stand at 6.5 billion barrels (with 1.5 billion recoverable).

• Since 2017, Oranto Petroleum Limited and Armour Energy Uganda Limited have held licenses for the Ngassa Deep & Shallow Play and Kanywataba contract areas, respectively. These companies are continuing the required technical studies, aiming to drill exploration wells.

• In February and May 2023, additional exploration licenses were granted to Uganda National Oil Company and DGR Energy Turaco Uganda SMC Limited for the Kasuruban and Turaco contract areas, respectively. These licenses concluded the Second Competitive Licensing Round, which began in 2019. Both companies are now conducting technical studies and gathering data in preparation for exploration drilling.

• The Ministry is also conducting preliminary petroleum exploration studies in the Moroto-Kadam Basin to assess its oil and gas potential. Similar surveys have started in the Kyoga Basin, with plans to initiate studies in the Hoima Basin soon. Early results suggest the potential for commercial oil and gas in the Moroto-Kadam Basin.

1. These exploration efforts are expected to increase Uganda’s petroleum reserves, extend production beyond 25 years, and enhance the viability of midstream projects such as the Refinery and the East African Crude Oil Pipeline (EACOP).
2. In January 2023, TotalEnergies E&P applied for certificates of surrender for the Jobi-East and Mpyo discoveries, followed by the Lyec discovery in December 2023. Field assessments were conducted to evaluate site conditions and address compliance issues, with the goal of finalizing these handovers. The process is expected to be completed by the end of 2024.

Development & Production Projects

The Tilenga Project:

1. The Tilenga Project, spanning both the North and South of the Nile in Nwoya and Buliisa Districts, is making remarkable progress.

1. Sixty three (63) out of the planned 426 wells have been successfully completed, with positive hydrocarbon shows in the targeted reservoirs. Additionally, development plans for a Liquefied Petroleum Gas (LPG) facility have been submitted to the government and are currently awaiting approval, and issuance of a license.

1. Drilling activities have so far focused on six (6) of the thirty-one (31) well pads that will host 426 producer and injector wells for the Tilenga project. The well pads are Jobi-Rii 05 & 04, Ngiri 03 & 01, and Gunya 01 & 04. All three rigs designated for drilling are operational, and a total of 63 wells have been drilled as of August 16, 2024. Currently, seven well pads are over 85% complete and ready to receive a rig.

1. Civil works at the Tilenga Industrial Area, which will host the Central Processing Facility (CPF), Drilling Support Base, Construction Camp, and other facilities, are 99.7% complete. All sections of the Industrial Area have been handed over to the Drilling and Wells Contractors and the Engineering, Procurement, Supply, Construction, and Commissioning (EPSCC) contractor.

1. The construction of the CPF is progressing well, with the erection of the main pipe racks and the construction of equipment and foundation bases underway. Overall completion stands at 47.8%.

1. At the 4,000-person occupancy Construction Camp, assembly of accommodation units continued, with a current capacity of about 2,500 as well as the construction of recreational facilities. .

1. Land Acquisition: All necessary land for the Tilenga project has been secured. The project was able to accomplish voluntary land acquisition for 99.7% of the project affected persons (PAPs), that is 4,917 out of 4930, and cash compensation has been duly and fully paid.  In addition, the in-kind compensation for the PAPs (land for land) stood at twenty-one (21) out of thirty-three (33) PAPs, representing (63%).

Kingfisher Development Area Project

1. The Kingfisher Project, located in Kikuube District, is operated by CNOOC Uganda Limited on behalf of the joint venture partners. The development plan includes a Central Processing Facility (CPF) with a capacity of 40,000 barrels per day and the drilling of 31 wells across four well pads.

• Drilling Operations: Drilling of production wells began in January 2023, using a single rig operated by COSL. So far, nine of the eleven wells required for First Oil have been successfully drilled.
• Regarding the Engineering, Procurement and Construction (EPC activities:
  • Construction of well pad sites and infield roads is well underway, with 92% of the work completed.  This represents work package 1.
  • Second work package, (EPC-2) for the Supply Base Station, Permanent Camp, and Safety Station is 82% complete.
  • The third work package (EPC-3) for the Kingfisher project, which includes the Kingfisher CPF, lake water intake pump station, infield flow lines, and well pads, is 30.3% complete.
  • The EPC-4 package, covering the high-voltage power line and feeder pipeline, has reached 50.9% completion. This includes ongoing activities like pipe laying, welding, testing, insulation, painting, trenching, and river crossing for the feeder line, as well as trenching and civil works for the 66kV power line.

• Land Acquisition: The project has successfully acquired approximately 1,020 acres of land needed for the Kingfisher Development Project.

• Both the Tilenga and Kingfisher projects are implementing various livelihood restoration programs encompassing transitional and psychosocial support, agriculture improvement, reproductive health services, vocational training and business development services.

THE MIDSTREAM PROJECTS

The East African Crude Oil Pipeline (EACOP)

• Significant progress has been made on the East African Crude Oil Pipeline (EACOP) since the EACOP Company was granted a Construction License in 2023, allowing civil works to commence at the Main Camps and Pipe Yards (MCPYs) in Hoima and Sembabule districts.

• The Engineering, Procurement, Construction Management and Commissioning (EPCMC) activities for the EACOP project are ongoing in London, and Dar es Salaam. Worley is undertaking this work with its subcontractors – ICS Engineering in Uganda and Norplan in Tanzania. The overall progress of the EPCMC activities was at 39.2%; the engineering phase was at 81.1%, procurement at 54.5%, and construction and commissioning at 15.4%. Detailed engineering, being carried out by Worley, was at 89.1%, surpassing the planned 88.3%.

• Construction of the thermal insulation plant in Nzega District, Tabora region in Tanzania was completed and commissioned on 26th March 2024.  Seven (7) batches of line  pipe, totalling to 500kms, have so far been delivered to Tanzania of which five (5) batches have been delivered to the Thermal Insulation System plant in Nzega.

• Civil Works Commencement: China Petroleum Pipeline Engineering Ltd (CPP), the pipeline construction contractor, has begun civil works at the Pump Stations (PS) and Main Camp and Pipe Yard (MCPY) sites in both Uganda and Tanzania.
• Early civil works are ongoing in both Uganda and Tanzania. In Uganda, work has been completed at three of the five MCPYs located in Hoima, Kakumiro, and Sembabule districts, while work continues at the MCPYs in Mubende and Kyotera districts. These works, which are being carried out by Ugandan companies, are establishing logistical and accommodation hubs to support the construction of the pipeline and Above Ground Installations (AGIs).

• In Tanzania, Nyanza is leading early civil works at MCPY-5, and work at other MCPYs has been completed. CPP has taken over to construct the camps.

• Land Acquisition: The EACOP project spans approximately 2,740 acres in Uganda, affecting 3,660 individuals, with 177 requiring resettlement housing. All resettlement houses have been constructed and handed over.

• So far, 95% of affected persons have received compensation, and 97% have signed compensation agreements, with remaining payments ongoing. However, there are 112 cases under consideration for compulsory land acquisition due to issues such as untraceable individuals, landowner disputes, refusal of compensation offers, and lack of legal title.

The Uganda Refinery Project

• In December 2023, the Government signed a Memorandum of Understanding (MOU) with Alpha MBM Investments LLC from the UAE for the development of Uganda’s refinery.

• Negotiations for the key commercial agreements including the Implementation, Crude Oil Supply, and Shareholders Agreements between the Government and Alpha MBM Investments LLC began in January 2024 and are currently ongoing.

• Once these agreements are finalised, the consortium is expected to promptly begin the project implementation. These efforts are crucial for Uganda’s ambitions to boost oil production, drive economic growth, and generate significant national revenue.

Kabalega Industrial Park (KIP)

• UNOC has additionally progressed well with the establishment of the 29.57 square km Kabalega Industrial Park and key milestones have been registered. Situated 55km West of Hoima in Kabaale Parish, Buseruka sub county; Its anticipated that the Kabalega Industrial park will promote the rapid development of the oil and gas industry and other support economic activities in the area. Below is the status on key infrastructure in the Industrial Park:

The airport stands at 95% completion, and is expected to be ready by 3^rd quarter of 2025.

Construction of the EACOP pump Station (PS 1) and King fisher feeder line is ongoing

The contract for the design and build of the 240MV sub station was signed and will be completed in 3^rd quarter of 2025. The design for the water reticulation, waste management, 94km road network, and 30km double fence and access to the KIP have been completed.

Construction of the UNOC site offices is set to commence in 4^th quarter of this year – 2024. An MOU to commence the construction work scoping process for phase 1 infrastructure has been signed between MEMD, UNOC and SBI.

The land allocation policy was finalized, and the land service rates are up for presentation to Cabinet for approval. The strategic ESIA for the KIP awaits approval from NEMA.

Economic and National Content

• Contracts valued at US$ 5  billion have been awarded for the Tilenga, Kingfisher, and EACOP projects, out of the US$ 7.2 billion approved by the Petroleum Authority of Uganda.

• Notably, US$ 2 billion—representing 41% of the total contracts awarded—have been allocated to Ugandan companies, underscoring a strong commitment to local content and ensuring that significant benefits from these projects are retained within the country.

• The sector directly employed fourteen thousand, four hundred fifty-one (14,451) people, of whom thirteen thousand forty-eight (13,048) are Ugandans (90%). The licensees directly employed one thousand, four hundred three (1,403) people, of whom 67% are Ugandans. The Licensee’s Contractors and their sub-contractors employed thirteen thousand three hundred ninety-nine (13,399) of whom 92% are Ugandans. The companies sourced four thousand, four hundred eighty-three (4,483) employees from the local communities.

Downstream

• Following the amendment of the Petroleum Supply Act of 2003 in 2023; we recall UNOC was given the mandate as the sole importer and supplier of all Ugandan bound petroleum products. The following milestones have since been achieved.
• The Petroleum Products Supply Agreement was signed with Vitol Baharain to supply all UNOC petroleum needs and UNOC established a branch office in Kenya
• UNOC received the Energy and Petroleum Regulatory Authority (EPRA) petroleum license to operate in Kenya.
• The Transport and Storage Agreement was signed between UNOC and the Kenya Petroleum Company
• The Tripartite Agreement between the Uganda Government, Kenya Government and UNOC was signed paving way for commencement of the importation business.
• The first Cargo for UNOC petroleum products was received on the vessel – MT Martinez with 58,330mt of Petrol, and another vessel – Sinbad was received carrying 79,968mt of diesel between 2^nd July and 4^th July 2024.
• The pump prices will decline in the medium term. We have to note however that petroleum prices are hinged on global market conditions.

CONCLUSION

• In conclusion, Uganda’s leap in economic growth is partly based on the development of its oil and gas resources, which, once commercialized, will significantly impact all Ugandans. The Ministry is finalizing the review of the National Oil and Gas Policy to ensure that sustainable development of the petroleum resources is in tandem with the current dynamic global environment

• Balancing economic growth, social development and environmental conservation remains a priority as the country navigates its path to prosperity.

Dr Ruth Nankabirwa Ssentamu,

MINISTER OF ENERGY AND MINERAL DEVELOPMENT

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