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I would like to table this brief on the updates of the petroleum sectors activities as a
response to the issues raised for Non-Participation of Host Communities in the
Developments taking place in the Oil and Gas Industry in the country.
A. INTRODUCTION
2.
Following the discovery and confirmation of commercial oil and gas resources in Uganda
(amounting to 6.5 billion barrels of oil, of which 1.4 1.7 billion barrels is estimated to be
recoverable), progress has been made towards the commercialization of these resources in
line with the Uganda oil and Gas Policy of 2008. A legal and institutional framework has
been put in place to guide the sector, and progress has been made in the areas of
licensing, petroleum infrastructure development, and the promotion of national content to
ensure community and national participation in the sector.
Rt. Hon. Speaker, the policy and regulatory framework which has been put in place to
govern the petroleum sector includes the following (in addition to other cross-cutting legal
frameworks for land, the environment, Finance etc.):a. The National Oil and Gas Policy for Uganda 2008.
b. Petroleum (Exploration, Development and Production) Act, 2013 (The Upstream
Act)
c. Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013
(The Midstream Act).
d. The Petroleum Supply Act, 2003 (The Downstream Act).
e. Regulations operationalizing the above laws.
4.
Furthermore, the following institutions have been established to manage the sector:
a. The Directorate of Petroleum, to advise the Minister on Policy matters;
b. The Petroleum Authority of Uganda (PAU), to carry out regulatory functions; and
c. The Uganda National Oil Company (UNOC), to carry out business activities.
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Boards of Directors and CEO / ED for the UNOC and PAU are in place and recruitment of
the next line managers is underway.
5.
Rt. Hon. Speaker, following the enactment of the Petroleum upstream and midstream Acts,
the following regulations have been developed to operationalise the two Acts:
The above Regulations and other legal documents governing the oil and gas sector were
laid to Parliament in August, 2016.
D. COST RECOVERY
7.
Rt. Hon. Speaker, the Petroleum (Exploration, Development & Production) Act, 2013 vests
the mandate of monitoring the costs of petroleum activities in the Petroleum Authority of
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Uganda (PAU). Before PAU was operationalised in 2016, this role was carried out by the
Petroleum Exploration Development and Production Department (PEDPD).
8.
A Cost Monitoring Framework (CMF) has been under implementation within the Petroleum
Exploration Development and Production Department (PEDPD) which includes four stages
of monitoring, that is;
i. Approval of annual Work Programs and Budgets.
ii. Approval of Procurement Guidelines/Regulations for goods and services to be used in
petroleum activities.
iii. 24-Hour Monitoring of field activities.
iv. Detailed Cost Recovery Audit by the Office of the Auditor General (OAG), working in
close collaboration with PEDPD.
The Cost Monitoring Framework will now be taken forward by the regulatory entity, PAU.
E. LICENSING
Rt. Hon. Speaker, current the oil and gas industry, we have two (2) licensing regimes;
(i)
Production Licenses
9.
On 30th August, 2016 Government granted a total of eight (8) Petroleum Production
Licences over oil fields in Exploration Area 2 (EA2) and Exploration Area 1 (EAI)
respectively.
10.
Five Petroleum Production Licences including Kasamene-Wahrindi, Nsoga, KigogoleNgara, Ngege, and Mputa-Nzizi-Waraga were granted to Tullow Uganda Operations Pty
Limited (Tullow), the operator for EA2, and three Petroleum Production Licences including
Ngiri, Jobi-Rii and Gunya were granted to Total E&P Uganda B.V. (Total) the operator of
EA1.
11.
The eight Production Licences granted are in addition to the Production Licence earlier
granted in 2012 over the Kingfisher field to CNOOC Uganda limited, the operator of the
field.
12.
The review of the applications for Production Licences for Mpyo and Jobi-East development
areas in EA 1 operated by Total are still ongoing, while the Lyec discovery also in EA1 is
still under appraisal.
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13.
14.
The grant of a Petroleum Production Licence paves way for the oil companies to move into
the development phase, and put in place the necessary infrastructure prior to
commencement of Production.
Government and the oil companies are taking all the necessary steps in accordance with
the implementation schedule of the MoU entered into between the operating oil companies
and the Government of Uganda with respect to commercialization of the oil and gas
discoveries to ensure that First Oil is delivered in 2020.
(ii)
15.
Exploration Licenses
Government is nearing conclusion of undertaking the first competitive licensing round for oil
and gas exploration, development and production in the country. This licensing round was
announced on 24th February 2015, where six high potential blocks were offered. The
offered blocks included the following (Figure 1):
i) The Karuka-Taitai Block, located at the northeastern edge of Lake Albert, in Buliisa
District.
ii) Kanywataba Block, located at the southeastern edge of Lake Albert, in Ntoroko
District.
iii) Ngassa Block, which is located in the central part of L. Albert shores, in Hoima District.
This Block largely lies offshore on Lake Albert.
iv) Turaco Block, located south of Lake Albert in Ntoroko District.
v) Ngaji Block, located in the eastern part of Lake Edward, in Rukungiri and Kanungu
Districts.
16.
Karuka-Taitai and Ngaji blocks did not attract successful bidders, while the Kanywataba,
Ngassa, Turacco and Ngaji blocks attracted a total of four successful bidders.
17.
The licensing round has progressed to the stage of negotiation of Production Sharing
Agreements (PSAs). Negotiations, which commenced during early August 2016 are
currently on going with the following companies for the respective blocks:
i) Armour Energy Limited for Kanywataba Block.
ii) Waltersmith Petroman Oil Limited for Turaco Shallow and Deep Plays.
iii) Oranto Petroleum International Limited for Ngassa Shallow and Deep Plays, and
18.
Upon conclusion of successful negotiations, it is expected that a total of five (05) new
Exploration Licences will be issued after Cabinet approval.
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Figure 1: Map of the Albertine Graben showing the blocks announced for the First Licensing
Round
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19.
Licensing of more acreage in the country is aimed at expanding the countrys hydrocarbon
resource base, enhance sustainability of oil and gas production and the revenue from oil
and gas activities.
Rt. Hon. Speaker, the LABDC was set up in the year 2012, to coordinate the legal, fiscal,
financial, commercial and technical requirements for oil and gas developments in the
Albertine Basin. The committee has representation from the oil companies and government
institutions including: State House, Ministries of Energy and Mineral Development, Justice
and Constitutional Affairs, Finance, Planning and Economic Development, Lands, Housing
and Urban Development, Trade Industry and Cooperatives, Tourism, Wildlife and
Antiquities, Works and Transport and the Ministry of Local Government; and also the
Uganda Revenue Authority and National Planning Authority.
21.
The Committees main deliverables include, i) a harmonized oil and gas sector development
plan; ii) a roadmap with key milestones for the agreed development plan and
implementation of Upstream, Midstream and Downstream projects; and iii) a coordinated
implementation of the development plan.
22.
ii) A harmonized understanding of the oil and gas resources available and the
commercialisation process.
iii) An Implementation Plan for the development of the oil and gas resources in the
country aligned with the proposed Midstream and Downstream projects (the MOU
Implementation Plan).
23.
A coordinated execution of the implementation plan including completion of the Legal and
Regulatory framework; improvements in infrastructure; establishment of the Petroleum
Authority of Uganda and Uganda National Oil Company; acquisition of land for the refinery;
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24.
selection of the most optimal route for the crude oil export pipeline; and issuance of eight
production licenses have been concluded.
The coordination process to ensure execution of the implementation plan is continuing.
This however requires a dedicated multi-sectoral implementation committee. The
establishment of this committee is under consideration by the Ministry.
Rt. Hon. Speaker, the Government of Uganda is planning the development of a 60,000BPD
Greenfield refinery in Kabaale, Hoima district. The project includes a 201 km refined
products pipeline from the refinery to Buloba, near Kampala. The Greenfield oil refinery will
be developed in two modules of 30,000 BPD each, with the first one expected to be
completed in 2020 and the second train to come on board two years later.
26.
The Government of Uganda invited EAC Member States to participate in the Public shares.
The Republic of Kenya confirmed 2.5% and the United Republic of Tanzania intimated 8%
participation. Rwanda is yet to respond.
27.
28.
A tender process for procurement of a Lead Investor was issued in 2013 and a number of
firms participated. Following evaluation of the bids, two firms were selected to progress to
the negotiations stage (with RT-GR as preferred winning bidder and SK-E&C as alternate
preferred bidder).
29.
Negotiations were conducted with RT-GR Consortium and concluded in May 2016 with all
the project Principle Agreements agreed upon. The contract was however not entered into
as the Lead Investor Consortium decided to reopen for renegotiation issues that were
already closed. The Government therefore called off the negotiations with the Lead Investor
Consortium.
30.
Following the collapse of negotiations with the preferred bidder, Government invited the
alternate preferred bidder (SK Engineering and Construction from the Republic of Korea) to
commence negotiations on the Refinery Project. The Consortium however was not able to
proceed with negotiations with the project sighting the following reasons: i)
The inability to raise its equity contribution of 60% and consequently asked that
Government raises its equity contribution from 40% to 70%; and
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ii)
31.
Crude supply guarantees and requiring Government to guarantee its profits through
the lifetime of the project.
However, a number of companies/firms (over 25 firms) have since expressed interest in the
project. The selection process is to progress with a view of selecting the most suitable
partner for the project by mid - 2017.
Rt. Hon. Speaker, at the 13th Northern Corridor Integration Project (NCIP) Summit which
was held on 23rd April, 2016 in Kampala, a decision was taken to develop a crude oil export
pipeline from Kabaale, in Hoima District of Uganda to Tanga Port in Tanzania. The 1445 km
long, 24-inch diameter, heated pipeline is being developed to provide access for Ugandas
crude oil to the international market.
33.
Project Development Committees for the EACOP project have been established, that is:
i) A Pipeline Project Team (PPT) which is handling the day-to-day activities of the project;
ii) The Joint Project Development Committee (JPDC) which receives updates from the
PPT and provides progress reports to the Project Steering Committee (PSC);
iii) The PSC chaired by the Permanent Secretaries responsible for petroleum in Uganda
and Tanzania. The PSC provides leadership and support to the JPDC;
iv) An Advisory Committee (AC) chaired by the responsible Ministers in Uganda and
Tanzania; providing strategic direction and political leadership to ensure effective
implementation of the project.
34.
The AC, PSC and JPDC meet every 4 months alternately in Uganda and Tanzania to
review the progress of the project. Three such meetings have so far been held, and the next
ministerial meeting is planned to be held in Kampala in February 2017. As mentioned, the
PPT works on the project implementation process on a daily basis.
35.
iii) Route survey for the entire pipeline route is ongoing using LIDAR technology. The
Uganda section has been completed, while the Tanzania section is expected to be
completed this December 2016.
iv) Procurement of Advisory Services by Government of Uganda for legal, financial and
commercial aspects of the project is ongoing. The award of contract is expected in
February 2017.
v) Development of a harmonised fiscal regime for the EACOP Project is ongoing. The
Government of Tanzania has issued a letter of comfort on the progress they are
making. Uganda is in the process of addressing this matter.
36.
37.
North West of Kampala will be developed to serve both as a Central Bulk Storage Facility
and a Distribution Terminal.
39.
The pipeline is planned to be developed within an integrated utility corridor which will
accommodate a highway, power transmission, and Information Communication and
Technology (ICT) infrastructure. Once developed this will be the first integrated
infrastructure corridor in Uganda, with the objectives of optimizing land use and reducing
the environmental footprint for the various infrastructures, sharing of utilities, and enhancing
infrastructure security.
40.
The detailed routing of the corridor, together with the Environmental Baseline Survey
studies were completed in September 2016.
41.
The land acquisition process for the infrastructure corridor has commenced with a
Resettlement Action Plan (RAP) study that is ongoing. This will be followed by land
acquisition once the valuation surveys are completed and compensation values approved
by the Chief Government Valuer.
My Ministry, with support from the Royal Norwegian Government, has been working on a
strategy and plan for petroleum transportation and storage in the country. The
implementation plan component is being finalized.
43.
As the sector develops, other pipelines to be developed in the country will link up with
regional pipelines in Kenya and Rwanda. Related feasibility studies were carried out to
provide a framework for future investment promotion in these pipelines. As you may be
aware, the Uganda-Kenya pipeline has been delayed due to the priority requirement to
develop a refinery in Uganda.
I. LAND ACQUISITION
a) Upstream/Field Development
44. Rt. Hon. Speaker, having been granted petroleum production licenses, the three oil
companies operating in the Albertine Graben have embarked on the process of acquiring
land for the development of infrastructure to facilitate production of oil. CNOOC Uganda
Limited has already conducted a Resettlement Action Plan (RAP) study for acquisition of
land for its facilities in Buhuka and the report has been submitted to the CGV for approval.
Implementation is planned for early 2017. The RAP study for the feeder pipeline from the
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Central Processing Facilities (CPF) in the Kingfisher Development Area to the refinery is to
be undertaken subsequently.
45.
Tullow Uganda Operations Ltd and Total E&P are to undertake joint land acquisition for
their areas of operation in Buliisa and Nwoya. The companies have together undertaken a
Land Access and Resettlement Framework (LARF) in the Nwoya and Buliisa areas where
extensive consultations with communities have been done. This activity will followed the
Resettlement Action Plan study.
b) Midstream
i) Petroleum- Based Industrial Park
46.
47.
The Resettlement Action plan study for the infrastructure corridor which will host the refined
products pipeline from the refinery in Hoima to the storage and distribution terminal at
Buloba near Kampala, is ongoing. The land for the storage terminal at Buloba has already
been acquired.
49.
There are various challenges being encountered in the process of acquiring land required to
develop the petroleum sector. These include the following;
Land disputes pitting individuals who sometimes have land titles against communities.
Speculation targeting compensation hence resulting in distortion of land markets and is
also a threat to the land rights of customary owners and communities.
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Absence of some relevant technical officers in the land offices of the districts of Bullisa,
Nwoya and Hoima.
50.
The actions being taken to address the challenges including the following:
Ministry of Lands, Housing and Urban Development has cancelled land titles in the
Kingfisher Development Area.
The Ministry of Lands, Housing and Urban Development facilitated the community of
Buhuka parish in the Kingfisher Development Area to register a communal land
association to protect their communal land rights.
The Ministry of Lands, Housing and Urban Development is undertaking physical
planning for some petroleum areas to develop plans for land use in those areas.
Rt. Hon. Speaker, the Government has been and continues to undertake specific actions
that will result into increased participation by nationals in the oil and gas sector both in
employment and service delivery. These include;
a) Policy, Legal and Institutional Framework
The following achievements have been made in this regard:
i.
Carried out an opportunities and challenges study for nationals participation in 2011
ii.
iii.
iv.
National Content Regulations for Upstream and Midstream were gazetted in June
2016.
v.
b) Skills Development
The key achievements in this area include the following;
i.
Over 200 GoU personnel from various Ministries, Departments and Agencies have
been trained in petroleum related aspects (Geosciences, Engineering, Accounting,
Law, Economics, Security and among others.
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52.
ii.
iii.
iv.
v.
vi.
Offered placement & Internship for students and also supervised research students.
vii.
Capacity skills need analysis for the Oil and Gas sector undertaken and a Workforce
skills development strategy and plan put in place.
viii.
Two training institutions (UPIK and Q-sourcing assessed by OPITO (an internationally
recognized oil and gas skills certification company) on their capability to offer OPITO
qualifications. Both institutions were found to have capability to offer Foundation and
level I (Electrical and Mechanical maintenance)
ix.
Signed an Implementation Agreement with GIZ for 11.2 Million Euro for Oil and Gas
Skills development.
x.
Finalized negotiations with the World Bank for a 500,000 USD grant to support National
Content Development.
Ongoing Activities in advancing national content in the sector include the following:
i.
Implementation of Skills for Oil & Gas SOGA project: To train Ugandans in skills
related to oil and Gas at Craft and basic level.
ii.
iii.
iv.
v.
vi.
53.
Achievements have also been made in promoting enterprise development in the oil and gas
sector, including the following:
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54.
i.
ii.
iii.
Supported the establishment of the Association of Oil and Gas Service providers and
30 of these companies trained in HSE (Nebosh)
iv.
Developed standards to enable Ugandans participate in the sector. (these include PPE,
HGV, Scaffolding, among others)
Establishment of the Industry Enhancement centre (IEC) - Design completed- The IEC
will provide Training, Matching and Financial Advisory Services to enterprises
ii.
iii.
Development of standards for all the goods and services reserved for Ugandans
iv.
v.
vi.
55.
Ugandas oil and gas sector has registered overall growth in the employment of Ugandans.
By the end of 2015, a total 281 Ugandans were employed the licensed oil companies in the
country. This accounts for about 80% of the licensees employees. Indirect and induced
employment of Ugandan accounts for 95%. Figure 2 shows highlights the trend of
employment of Ugandans by the licensees since 2010.
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561
496
500
400
490
373
371
392
281
300
243
202
200
175
160
131
100
0
2010
2011
2012
2013
Total Employment
2014
2015
Nationals
Figure 2. Trend of Direct employment in the Oil and Gas Sector since 2010 (MEMD, 2016)
In line with the National Oil and Gas Policy which emphasizes the need promote use of
locally produced goods and services in the country, there has growth in the percentage
contract value spend with Ugandan companies from 17% in 2009 to 42% in 2016. A slight
decline was registered between 2014 and 2015 from 42% to 36% and this was due to the
low level of activity in the oil and gas sector globally. Figure 3 illustrates the trend of total
contracts spent with local companies. On average, the supplies by local companies was
about 28% of the total spend of USD3.2 Billion equivalent to USD 900million.
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36
34
30
25
27
25
23
20
17
15
10
5
0
2009
2010
2011
2012
2013
2014
2015
K)
57.
L)
58.
STAKEHOLDER ENGAGEMENTS
Rt. Hon. Speaker, there has been a lot of effort to communicate and sensitise communities
and other stakeholders especially regarding the status of developments and also prior to
undertaking certain activities within communities. We sometimes have done sensitisation
activities together with some of our partner, Civil Society Organisations (CSOs).
CONCLUSION
Rt. Hon. Speaker, a lot has been achieved in the sector despite the fact that first oil will not
come as earlier scheduled in 2018. It is important to point out that the period of low activity
has allowed Government to put in place the right legal, regulatory and institutional
framework.
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