Buyuma Weekly Uganda Energy Roundup(Wk 18)

Hello There,

Welcome to this week's?Buyuma Ugandan oil and gas weekly update?covering?the latest energy?news that made waves in Uganda.

Uganda is to host the 10th East African Petroleum Conference and Exhibition (EAPCE’23) between 9th-11th May 2023 at Kampala Serena Hotel.

The theme of the conference and the exhibition under the East Africa Community Treaty is “East Africa as a hub for Investment in Exploration and Exploitation of Petroleum Resources for Sustainable Energy and Socioeconomic Development”

Held biennially since 2003, the East African Petroleum Conference has provided increased awareness of the potential for the production of petroleum in the region and other important issues in the petroleum sector, including technological advancements in exploration, development and production

Below are?updates that made the headlines in Uganda's Oil and Gas sector

Uganda to host 10th EAC Petroleum Conference

Uganda has yet another opportunity to showcase and market its petroleum potential as it hosts the 10th East African Petroleum Conference and Exhibition (EAPCE’23).

The 10th edition of the conference (EAPCE’23) is organized by all members of East Africa partner states and will take place between 9th-11th May 2023 at Kampala Serena Hotel.

The theme of the conference and the exhibition under the East Africa Community Treaty is “East Africa as a hub for Investment in Exploration and Exploitation of Petroleum Resources for Sustainable Energy and Socioeconomic Development”

Uganda should have hosted this biannual conference two years ago but it was postponed following the outbreak of COVID-19. Covid-19 led to a slowdown in the oil and gas sector.

The Energy and Minerals Development Minister, Ruth Nankabirwa in a speech announcing the EAPCE’23 said the conference after a Final Investment Decision for the Tilenga, Kingfisher, and East African Crude Oil pipeline will have more people seeking opportunities in Uganda’s oil and gas.

This is the second time that Uganda is hosting the conference organized on a rotational basis among the East African Community member states.

Nankbairwa in a speech read for her by the Acting Director of Petroleum, Honey Malinga said the conference has created opportunities for the EAC partner states and the private sector through sharing information on investment opportunities in oil and gas.

The conference and exhibition come at a time when the government has just concluded the second licensing round for new exploration areas in the Albertine.

The Minister of Energy early this month signed production-sharing agreements(PSAs) and awarded an exploration license to Uganda National Oil Company (UNOC) for the Kasuruban area. UNOC’s Head of Exploration and New Ventures, Lyoidah Kiconco told URN that they plan to use the conference to seek potential partners as the company embarks on exploration.

Nankabirwa had previously announced that she would make announcements for the third competitive licensing round for oil blocks as it has been in the past. But Malinga told journalists that it is unlikely that will happen as it has been in the past. He said the process of new blocks and licensing was yet to be approved by the cabinet.

Uganda’s resource base currently stands at 6.5 billion barrels of oil in place. It is expected that more discoveries through exploration may increase the resource base beyond 6.5 billion.

East Africa Petroleum Conference and Exhibition offers a wide range of technical presentations reflecting developments in the oil and gas industry in East Africa and around the world.

Secretary General East African Community, (Dr.) Peter M. Mathuki last week said EAPCE’23 will provide a unique forum for dialogue for all players in the oil and gas industry at both the regional and international levels.

The conference also gives stakeholders in the oil and gas sector an opportunity to interact with EAC senior government officials and decision-makers.

Africa to set up funding bank for oil, gas projects?

The African Petroleum Producers’ Organisation (APPO) is finalising plans to set up the Africa Energy Bank.?

The bank expected this year, will finance oil and gas activities on the continent without the need for external financing that comes with strings.?

Dr Omar Farouk Ibrahim, the APPO general secretary, said, African countries subscribing to the Petroleum Producers’ Organisation will partner with the African Export-Import Bank to establish an energy bank slated before the close of the year.

“This is going to focus essentially on funding oil and gas projects on the African continent because the funds have dried,” Dr Ibrahim said, noting that the World Bank, and other international financing institutions that used to fund oil and gas projects are closing the financing channels in addition to having “stringent conditions, which doesn’t make a lot of sense” compared to 20 or 30 years ago.?

The organisation plans to attract investment from countries such as Saudi Arabia, UAE, Qatar and Kuwait, which have a lot of stake, and history in the development of oil and gas.?

The bank was mooted last year during the eighth African Petroleum Congress and Exhibition in Luanda, Angola.?

Speaking at the event last year, Angola’s President Joao Manuel Louren?o said the idea would resolve challenges faced national oil companies.?

The move comes at a time when many international banks are facing pressure from climate activists to stop funding oil projects over high carbon emissions, and the shift to cleaner energy.?

A number of major banks such as HSBC, Standard Chartered and Standard Bank announced how they are reviewing their lending for oil and gas projects in light of the net zero campaign.?

Uganda has faced challenges in financing the 1,443 kilometre crude oil pipeline over diminishing financing for greenfield oil and gas projects, and the pressure from climate activists to halt construction of the pipeline.?

Threats of funds withdrawal

EACOP, which will require a $4b investment has so far declared funding from Islamic Development Bank, and Afrexim Bank totaling to $300m (Shs1.1 trillion) but continues to face threats of commitment withdrawal by Europeans and American banks.?

Uganda to increase recoverable oil by 600 million barrels

The energy ministry is exploring the possibility of increasing the country’s 1.4 billion recoverable barrels of crude oil to 2 billion.

There is an estimated 6.5 billion barrels of crude oil under Lake Albert, of which about 1.4 billion are recoverable under the prevailing conditions. The reserves are expected to last up to about 25 years, with production peaking at 230,000 barrels a day.

“We are looking at about 25 years for the current resource (to last) of the 6.5 billion barrels of oil we have in the ground, with 1.4 recoverable." We are looking at methods of improving recovery beyond the 1.4 billion barrels. So, it is not a static figure that we shall stop at 1.4 billion,” Tonny Sserubiri, a principal geologist in the Ministry of Energy’s directorate of petroleum, said.

Sserubiri further explained; “The major methods that can be used in increasing oil recovery also called enhanced oil recovery techniques include gas injection (carbon dioxide, nitrogen), steam injection, also called steam flooding, and polymer flooding. Polymer flooding can be used alongside water flooding.”

He made the remarks while appearing on the Urban TV weekly morning talk show dubbed the Press Wall, hosted by Umaru Kashaka.

Others who featured on the two-hour show were former Buliisa County MP Stephen Mukitale, Impact in Uganda program leader Lynn Gitu, and senior stakeholder management officer at Petroleum Authority of Uganda, Didas Muhumuza.

In one month, Sserubiri said, they will be reviewing the National Oil and Gas Policy whose goal is to use the country’s oil and gas resources to contribute to the early achievement of poverty eradication and create lasting value for society.

It was approved by Cabinet on January 30, 2008, to guide the development of Uganda’s emerging oil and gas sector following the discovery of commercial petroleum resources in 2006.

“A draft National Petroleum Policy has been developed by a multi-institutional committee over the past year. Consultations with key stakeholders in the country will be undertaken to start next month. The new policy will consolidate the achievements of the existing one and address the new and emerging challenges, especially those related to production and the energy transition,” Sserubiri explained.

He said the new policy is intended to streamline policy, licensing, and regulation of the downstream (petroleum supply) subsector because the current policy caters to only the upstream and midstream petroleum segments.

“Other areas to be strengthened in the new policy include increasing national participation, supporting low-carbon initiatives, ensuring optimal petroleum production practices, and accelerating exploration of the country's petroleum potential,” Sserubiri stated.

Mukitale said it is the investment in the oil and gas sector, which could bring in the country more than $20b if the refinery, the East African Crude Oil Pipeline project, and the Tilenga and Kingfisher projects were all invested in simultaneously.

“So, in terms of gross domestic product growth, Uganda will attain middle-income status in three years as the President said. We are now in the development phase of petroleum and so now the debate in Parliament should not be on when this oil will be produced but at what recoverable cost because the country’s debt is already high,” he said.

“So whereas we don’t define it legally as a loan, we are going to produce oil on another loan of $20b. Parliament should therefore appropriate all the money required for counterpart funding and not only for PAU and Uganda National Oil Company,” Mukitale added.

Gitu, who is also an expert in energy and extractives, said Uganda has now got set to start pumping crude oil in 2025.

“I think this gets to set the stage we have moved to is critical because we have been waiting since 2006 and this stage is critical because it is a stage when we should be looking carefully at every foundation that we have laid whether it is the institutions, our legal framework, citizens’ participation, or media engagement so that more Ugandans have a better understanding of this technical sector,” she said.

Muhumuza said the oil and gas sector has reached a point of no return because of the magnitude of the work being done and the heavy investments.

In February last year, Uganda and Tanzania signed a deal with Chinese and French oil companies finalizing terms of a $10b drilling and pipeline project. The project's backers say it will usher in economic development across the region.

On January 24, President Yoweri Museveni officially commissioned the start of a drilling campaign on the Kingfisher oilfield, which is part of a $10b scheme to develop the country’s oil reserves under Lake Albert

Uganda to announce oil blocks licensing round in May

Uganda said on Friday it plans to announce a third oil licensing round in May in an effort to further develop a sector on track to produce its first oil in 2025.

Energy Minister Ruth Nankabirwa Ssentamu said in a statement detailing developments in the sector that the next licensing round would be announced at a regional petroleum conference due to take place in Uganda's capital Kampala in May.

She did not say how many blocks would be put up for auction.

The East African country discovered commercial hydrocarbon deposits near its western border with Democratic Republic of Congo in 2006. Production is projected to begin in 2025.

Uganda is also developing a crude export pipeline and a domestic crude refinery that will help to commercialise the country's oil resources.

A U.S. firm, Albertine Graben Energy Consortium Partners (AGEC), is planning to build and operate a $4.5 billion, 60,000 barrel-per-day refinery to produce a range of refined products and liquefied petroleum gas for the regional market.

It will also build a 213-kilometre (130-mile) refined products pipeline from the oilfields to storage facilities near Kampala.

Ssentamu said a final investment decision on the refinery was expected this year.

She added the pipeline and refinery would be developed concurrently and "when both projects are operational, the refinery will have the first call on crude oil".

All of Uganda's existing oilfields are jointly owned by France's TotalEnergies (TTEF.PA), China's CNOOC (0883.HK) and the state-run Uganda National Oil Company.

Time for Africa to use its oil to end energy poverty – Dr. Omar Farouk Ibrahim

Omar Farouk Ibrahim was the keynote speaker at the First Oil and Gas Expo an event organized by the Petroleum Authority of Uganda (PAU) held at the International University of East Africa in Kampala.

Dr. Farouk Ibrahim noted that there should be no reason why Africa has the largest population of people living in energy poverty.

Africa currently exports 70% of its crude oil and 45% of its gas. Global energy statistics indicate that Africa’s people have the least access to energy. Africa is estimated to have over 25 billion barrels of proven crude and over 600 trillion cubic feet of gas.

Where Did Africa Get It Wrong?

Dr. Farouk Ibrahim agrees with other researchers who have observed that Africa got it wrong from the very beginning where oil and gas development followed the colonial tradition where the industry was structured to serve foreign, not domestic needs.

“Thus Africa emphasized the cultivation of cash crops for export at the expense of food crops for its population,” said Dr. Omar Farouk Ibrahim whose organization promotes cooperation in the field of hydrocarbons between Member Countries and other international institutions.

Some of the original members of the African Petroleum Producers Organization (APO) include Algeria, Angola, Benin, Cameroon, Congo, Gabon, Libya, and Nigeria. Uganda which is developing its 1.6-billion-barrel oil and gas find is expected to join APO and the Organization of Oi Producing Countries OPEC.

According to Dr. Omar, when oil and gas were discovered in Africa the industry infrastructure that was developed was export-oriented not to meet the needs of Africans.

“So from the very beginning, the African government saw oil and gas as sources of foreign exchange with which to fund their annual budgets and to pay for imported goods and services. Little effort was put into developing a local market for our energy,”

As part of the efforts to commercialize Uganda’s newly found oil and gas resources, the governments of Uganda and Tanzania are to construct the East African Crude Oil Pipeline that will export the crude to the port of Tanga. Dr. Farouk Ibrahim suggested what he called a mindset that sees Africa’s salvation that comes out of Africa, especially from countries that dominated and colonized the continent for so long.

What Is the Future of Africa’s Oil in the Energy Transition?

For Dr. Farouk, the pursuit of the energy transition by the developed countries calls for Africa to take ownership of its oil and gas industry by itself.

“The solution to the eminent challenges that the energy transition poses to the African oil and gas industry lies in continuing not to do more of what we have been doing since independence. But in developing a different mindset. We have been conditioned to believe that the African oil and gas industry can’t make much progress without external support in financing, technology, and in markets”

He observes that the problem with accepting these doctrines is that Africa’s policymakers become so obsessed with what to do in creating an enabling environment for foreigners to come and develop its resources. “To the extent that they ignore the huge potential within their countries and their people,” said Farouk Ibrahim.

A study conducted by APO recently found three major challenges to Africa’s oil and gas finds in the wake of the energy transition debate. They included funding, the challenge of knowledge and expertise acquisition and the challenge of finding markets for oil and gas in the event that developed countries succeed to shift from no fossil energy.

The Energy and Mineral Development Minister, Ruth Nankabirwa agreed with Farouk Ibrahim about the need for the African governments to devote more money within their budget to develop oil and gas resources given the declining interest from the oilmen from the West and Asian countries. Farouk Ibrahim told URN that Africa produces about 8 million barrels of oil per day, 8mbd, or about 9% of global daily production.

He said most of Africa’s oil is exported outside Africa for two reasons. First is the lack of refining capacity, either because the refineries are not enough, or the existing ones are not operating optimally.

For countries like Uganda that are about to earn from the petrodollars, Farouk Ibrahim urges the executives in government ministries, bodies like the Petroleum Authority, Uganda National Oil Company(UNOC), and generally the elite not to repeat the mistake by some African countries to avoid lifestyles that could lead them putting the resources to waste by being moderate in their expenditure.

That's it for this week. Until next time, Cheers!