Cnooc Uganda ltd, the operator of the kingfisher field whose early drilling works were flagged off last week,will invest approximately $ 580m {shs2.1 trilllion} this year and next year in the quest to fast-track oil production to start in the quater of 2025.
Experts say the developments in the oil sector will deliver at least 150,000 jobs to Ugandans.The coast of the developing the oil fields,which will pump Uganda’s first crude oil, is estimated at $2b {shs 7.3 trillion} as per the petroleum Authority of Uganda{PAU} that among others reviews and approves oil companies’ work plans and budgets.
The frenzied investments kicked in the last year,with Cnooc investing $346m {shs 1.2 trillion} into the same project after the government and oil companies French TotalEnergies EP and Cnooc -announced investments of $10 billions {shs36.5 trillions} to bring Uganda within touching distance of starting commercial oil production in 2025.
Once commercial oil production starts,Cnooc will spend another $1.5 billion {shs 5.5 trillion} over a 20 year period of maintenance of the project.The significant amount of money,however,still goes back to foreign engineering,procurement and construction {EPC} firms employment on projects alongside local loans.
In the grand scheme of things,this year much like its predecessor kicked off on the a high note yesterday with the launching of early drilling works of the first oil well at the kingfisher oil field is located 2km off the shores of Lake Albert in Kikuube district.
The key ,milestone yesterday came almost a year after the oil companies and their local partners Uganda National Oil company {UNOC} and Tanzania petroleum development Corporation {TPDC} closed the long awaited final Investment Decision {FID}. This paved a way for the awarding of some 92 tenders totalling $1 billion {shs3.6 trillion} for provision of goods and services on the kingfisher project alone.
Of the $1 billion,according to Pau,contracts worth $270 millions {986 billion}were awarded to Ugandan companies mainly in areas of Civil works,hospitality management, transportation and ICT.
what next?
With the early oil drilling works for the kingfisher oil field ticked off,next in line is to kick start similar works on oil fields under the Tilenga project that straddles Nwoya and Bullisa districts operated by Total Energies EP.But the uphill task is the development of the 1,443 km East African Crude Pipeline EACOP) that will transport Uganda’s waxy crude oil from the kingfisher field and Tilenga to Tanga port in Tanzanian where it will be loaded in containers and route to the international market.
The closure of financing nearly $4.5 billion{shs 14 trillion) remains a total order but the officials say there is silver of hope.Uganda’s section of Eacop is 296km through 27 sub-counties,three town councils, as well as 171 villeges in 10 districts of Hoima, Kikuube, Kakumiro, Kyankwanzi, Mubende, Gomba, Ssembabule, Lwengo Rakai and Kyotera.
Tanzanian president Samia Hassan Suluh’s Beijing vist last November offered some charity on the course of the EACOP,according to highly placed sources.However,questions abound whether the pipeline can be ready in two-three years to transport crude oil to the market.The EACOP company is currently fast-tracking land acquisition for the project right of way but since infrastructure development in Uganda is never short of drama,including bureaucratic headwinds,only time will tell.
No mean feat.
Ms Irene Batebe,the energy ministry permanent Secretary,described the launching of Kingfisher oil field spudding as a”momentous occasion”,pointing to the government’s unwavering commitment to first oil in 2025.
“As a country, it implies that we are about to join the the league of oil producing countries behind Angola,Nigeria, and Libya,” Ms Batebe remarked.The other medium considered for commercialization of Uganda’s oil is the Proposed 60,000 barrels per day {bpd} refinery, but it remains a far cry.The government in 2017,awarded a consortium of American and Italian firms the tender to design, finance and construct the refinery projects,but besides the usual rhetoric,there is seemingly slow progress on that front despite recently announcing that its financing will be closed by this March.
The commencement of drilling of the development and production wells is the effect the start of trials for oil drilling using the rig that was hauled in the country last August and assembled in November.The process will culminate in the commercial production in late 2025.but could stretch into 2026.
Key Milestone
President Museveni,who has usually taken credit on Uganda’s oil discovery,extolled scientists led by the former Energy ministry permanent secretary Kabagambe Kaliisa,former petroleum Exploration and Production Department {PEPD} commissioner Rauben Kashambuzi, and petroleum Authority of Uganda{PAU} executive director Ernest Rubondo,for their pivotal role in shaping the oil journey as it is today.”How could i take on personal responsibility when i didn’t know?” Mr. Museveni said of the decision taken by his government in its early days 37 years ago to send a group of Ugandan scientists abroad to study oil and return home to take charge unlike many African governments which relied on foreign expertise.
“I want to salute the scientists and the oil companies we started with small ones like Hardman,Heritage and now here we are, with Total and Cnooc,” the president said,adding,” I want to congulagulate Cnooc for moving foward. I hope others are also moving forward.”
Kingfisher lowdown.
The Kingfisher oil field,formerly known as Exploration Area{EA} 3A, is part of Kingfisher Field Development Area{KFDA” that straddles Kikuube and Hoima districts.The KFDA is operated by Cnooc Uganda ltd,which awarded the tender for construction of the required infrastructure to pump oil to a joint venture of China offshore Oil Engineering company, and China petroleum & construction Corporation.
It is the successful drilling of oil well at EA31 2006 by the Australian Wildcatter, Hardman Resource and its Anglo-Irish partner Tullow Oil PLC, that led to the summation of Uganda’s oil deposits as “commercially viable.”The announcement was made by president Museveni during a national prayer breakfast convened at Kololo Independence Ground in Kampala.
Tullow oil PLC subsequently acquired Hardman’s stake, and in 2011,the former farmed down {sold stakes} to the French Total Energies EP and China’s Cnooc.Following commencement of operations in Uganda in February 2012, Cnooc was tapped operator of the EA3.
At the time,only the Kingfisher oil field had a license,which had been conditionally granted to Tullow around the time of the farm down.The condition to be satisfied included,among others, submitting an amended and restarted Field Development Plan and Petroleum Reservoir Report acceptable to the government,in accordance with the Petroleum Act and international petroleum Best practices.
The reports were submitted in November 2012,and rigorously reviewed,leading to lift of the conditions on September 16,2013 and its production license awarded on September 25 that year.The oil fields are owned jointly notwithstanding the individual operatorship by Cnooc and Total Energies.Total Energies commands 56.7 percent stake in the fields, CNooC with 28.3% and Unoc 15%.
Unoc is statutory body mandated to manage Uganda’s commercial interests in all petroleum licenses.
Mr.Rubondo revealed that the kingfisher oil field is estimated to have 560 million barrels of oil in place,out of which 190 million barrels of oil{33 percent} is expected to produce over a period of 20-25 years.
“The oil field is expected to have a maximum production of 40,000 barrels of iol per day for five years after which,production will begin to decline,”he noted,”The drilling rig,which you have just switched on, your Excellency,will be used to drill all the planned 31 production wells of this oil field.Twenty of these wells will be used to produce oil,while 11 of these wells will be used to inject water in the reservoir to help improve production.”
According to PAU, investments in development of the Kingfisher oil field is expected to cost more than $2billion {shs7.2 trillion} over the next three years until shortly after production starts.Mr Rubondo revealed that the Kingfisher project is already employing “over 1,500 people, of whom, 1,300 are Ugandans and about 500 are from the communities surrounding the project.”
