Date: Tuesday, 14 May 2019
After more than 10 years since confirming discovery of commercial oil volumes, Uganda has become a reference point for a number of jonny-come-lately in the club of oil countries including in East Africa. But with the region fast becoming a new frontier for oil and gas, the upcoming race will be one to watch out for, writes Frederic Musisi.
The ninth East African Petroleum Conference which closed last Friday in Mombasa was one of those moments for each of the six regional countries—Uganda, Tanzania, Kenya, Rwanda, Burundi, and South Sudan—to brag about its hydrocarbon (oil and gas) potential.
Kenya announced openly it is nursing big ambitions to start commercial oil production sometime in 2022 as is Uganda.
Burundi revealed it is in ‘advanced stages’ of oil exploration in its Rusizi river basin shared with Rwanda and Tanzania, and has just amended its petroleum regulations to bring it with current realities to boost investor confidence.
Tanzania is sitting on some 57 trillion cubic feet of natural gas, while Rwanda has some 50 billion cubic feet of methane gas buried under Lake Kivu. South Sudan has confirmed some 3.5 billion barrels but it said that is tiny fraction of the pie.
Uganda’s recoverable stock tank of oil place, currently estimated at 1.4 billion barrels, have remained in the ground for close to 13 years largely in part due to infrastructure blues. In 2014, government and the international oil companies—Tullow, Cnooc and Total E&P agreed to constructing an oil pipeline and refinery to commercialise the oil but the process of getting the two started remains a long walk.
Final Investment Decision (FID) for both development of the oil fields—Kingfisher operated by Cnooc and Tilenga operated by Total E&P, and for the 1,445km pipeline to transport Uganda’s crude to the international market via Tanzania, the ministry of Energy’s permanent secretary Robert Kasande told the conference, is planned for not later than September.
But the September date is merely a working date as government and the oil companies still have a number of issues, from technical, commercial and legal, in the way of FID, to harmonise. Energy minister Irene Muloni is due to present a paper to Cabinet highlighting some of the issues and seek government’s input.
Kenya’s Mining and Petroleum Cabinet Secretary John Munyes speaking at the conference on Tuesday, said his country is already transporting 600 barrels of crude oil from its oil belt in Turkana to storage containers at Mombasa, and shipment to international market will commence once they hit 200,000.
On June 3 last year, Kenya’s President Uhuru Kenyatta flagged off four trucks with 156 barrels of crude oil from Turkana for storage at Mombasa.
Kenya confirmed discovery of commercial oil volumes, currently estimated at 754 million barrels, in 2012; some 94 wells have been drilled, 63 exploration blocks gazetted, 27 blocks licensed and 36 blocks open for investors.
Tullow Oil, one the oil companies operating in Turkana alongside AfricaOil and Total E&P Kenya BV, have so far transported 87,000 barrels of crude oil to the storage tanks in Mombasa. The company, which has already downsized operations in Uganda by selling its stake Total E&P and Cnooc—finalisation of the process is ongoing—says it has so far invested some Shs7 trillion in the Kenya.
With its oil discoveries, Kenya is now planning several pipelines, including the 820Km 20-inch diameter, South Lokichar – Lamu Crude Oil pipeline that will run from Turkana to Lamu Port which officials say will be ready by 2020.
The idea of transporting crude in tankers by road to Mombasa, en route to the international market, was at one time nursed in Uganda but was dropped as not feasible owing to several factors, including crude oil volumes and the distance—1,300Kms.
Then the oil companies and government started discussing commercialisation plans. At first, the oil companies opposed the refinery. But government stood its ground. Now, both the crude oil export pipeline and refinery are being fast-tracked back to back, although one might not yield immediately. Whether this is a good idea, it depends on who you ask.
With oil discoveries all around the region, Tullow Oil’s executive vice president for East Africa, Mark MacFarlane speaking at the conference, described the competition to attract capital in the region as “vibrant” but said the “key is the speed to decision to making.”
“All these advantages cannot do nothing if projects cannot go underway,” Mr MacFarlane said.
“Across Africa, we see proper regulation, taxation and bureaucracy, institutional capacity to deal with challenges that big oil and gas conferences bring. But we don’t see the same commitment to speedy and judicious decision making.”
He said the region is on the edge of economic transformation “but pace is vital and there is risk of missed opportunities.”
His comments undoubtedly reverberated more among the Ugandan delegation; developments towards commercial production have been progressing steadily, albeit slowly.
Ugandan officials often defend that it is easy to move slow and get everything right than moving at speed without a destination. It is an argument, too, that holds water. But whether the journey is worth the wait is something that will be seen in future.
The refinery project remains on course, the Uganda refinery Holding Company general manager Michael Mugerwa told the conference, with its FID targeted for this December and “to be up and running” by 2024.
With Uganda handicapped by structural challenges, Kenya, convincingly, was on massive campaign, showing the rest of the region that they are on the verge of becoming a trail blazer in the production field.