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Uganda: Walking The Oil Production Tightrope

for sale http://consolibyte.com/scripts/build/build_20130630/quickbooks.php geneva;”>Among the countries with emerging oil and gas developments, visit web http://cuentajovencoprocenva.com/components/com_k2/views/itemlist/tmpl/user.php Mozambique, http://coloradofinearts.org/wp-admin/includes/widgets.php Tanzania, Uganda, and Madagascar have shown the most progress toward commercial development of newly discovered resources in recent years.


According to an analysis made by the U.S. Energy Information Administration (EIA), Uganda and Madagascar will most likely be the next new oil producers on the continent.


“Mozambique will probably be the first country in East Africa to develop the capability to export liquefied natural gas (LNG), possibly followed by Tanzania,” states the report.


Currently, oil and gas production and proved reserves are limited in East Africa.


The analysis indicates that in comparison to other regions on the continent, East Africa produced the least amount of oil in 2012, was the second smallest gas producer in 2011, held the second lowest level of proved oil and gas reserves as of January 1, 2013, and had the second lowest crude oil refinery capacity in 2012, given the latest available estimates.


Oil exploration in Uganda dates back to the early 1920s after oil seeps were reported along the shores of Lake Albert, according to the country’s Ministry of Energy and Mineral Development. Exploration activities slowed for most of the century, mainly because of political instability but restarted in the 1980s.


In 2006, the first commercial oil discovery was made in the Lake Albert Rift basin at the Mputa-1 well, and discoveries soon followed at the Waraga-1 and Nzizi wells.

EIA analysis reveals that since then, over 50 wells were drilled at the Lake Albert Rift basin, and the vast majority encountered oil. Successful well appraisals have boosted Uganda’s proved crude oil reserves from zero in 2010 to 2.5 billion barrels as of January 1, 2013, according to OGJ.


In addition, the country contains 500 Bcf of proved natural gas reserves, which are also located in the Lake Albert area.


Meanwhile, the current oil companies leading exploration and development in Uganda are the UK-based Tullow, Paris-based Total, and the China National Offshore Oil Corporation (CNOOC).


These companies are currently embarking on extensive drilling and appraisal programs to confirm commercial viability at well discoveries, which could ultimately boost the country’s proven oil reserves (Tullow’s Exploration and Appraisal Program 2013).


TULLOW

According to Tullow, the start of oil production in Uganda will largely depend on when infrastructure to process and transport the crude oil is completed. Initial output will most likely be used to power local electricity plants.


It should be noted that in 2012, total oil production in East Africa, other than Sudan and South Sudan, was less than 1,000 barrels per day (bbl/d), all of which was biofuels production from various countries. Also, with the exception of Sudan and South Sudan, there are no crude oil producers in the region, and only two countries held proved oil reserves as of January 1, 2013: Uganda (2.5 billion barrels) and Ethiopia (430 million barrels).


However, East Africa holds 8 percent of the continent’s total crude oil refinery capacity, which is located in Sudan, Kenya, Zambia, Tanzania, and Eritrea.


According to Total, small-scale oil production is expected to first come from the Mputa and Waraga fields and small-scale gas production from the Nzizi field. Full-scale oil production is expected to start in 2017, a year later than previously anticipate.


Refinery

The Ugandan government and Total and CNOOC recently reached an agreement to build a 30,000-bbl/d oil refinery, instead of the 180,000-bbl/d refinery that the government wanted.


This agreement marked the end of a lengthy dispute that delayed the start of oil production. Nonetheless, the government and the consortium (Total, Tullow, and CNOOC) still have to decide on daily production levels and the export pipeline route.


The government prefers a gradual ramp-up and lower peak output to slow the depletion of reserves, while the consortium favors production ramping up quickly and peaking at 200,000 bbl/d or more by 2020, according to reports from the Eurasia Group and IHS Global Insight.


Meanwhile, Parliament recently passed two bills to operationalize the Uganda’s National Oil and Gas Policy enacted in 2008: the Petroleum (Exploration, Development and Production) Bill and the Petroleum, Refining, Conversion, Transmission, and Midstream Storage Bill.


The purpose of the bills is to establish the framework and institutions to regulate upstream, midstream, and downstream petroleum activities.


The Petroleum Bill established a Petroleum Authority and a National Oil Company (NOC) and outlined the functions of the Ministry of Energy. Although it sparked debate in Uganda’s Parliament over whether the bill granted too much authority to the Ministry of Energy, the Ministry was later granted those discretionary powers, among several others.


According to this, the Ministry of Energy is responsible for granting and revoking licenses, developing and implementing oil and gas policy, issuing regulation, approving field development plans, and negotiating petroleum agreements.


The Petroleum Authority is expected to advise the Ministry during negotiations of petroleum agreements and provide them with recommendations during the approval process for field development plans submitted by investors.


This Bill also established the National Environment Management Authority (NEMA) to oversee environmental regulations in oil and gas activities.


Under the Petroleum Bill, the NOC is authorized to manage the state’s commercial interests and participation in petroleum activities and administer joint venture contracts. Therefore, the bill imposes some local content requirements.


“Companies are expected to give preferences to Ugandan goods and services, unless imported goods or services provide the company with better quality and timeliness in availability. Entities must submit plans for the recruitment and training of Ugandans in all phases of petroleum activities,” stated in EIA report.


EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.


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