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Uganda keeps oil industry hopes alive

Aerial shot of a drilling rig on the side of a lake
Lake Albert drilling

Uganda and Tanzania are pushing ahead with their plans for the East African Crude Oil Pipeline (EACOP) despite Total’s decision to put work on hold, following the breakdown of talks on the sale of Tullow Oil’s Ugandan stakes.

“Uganda and Tanzania are closely working together to facilitate the development of the [EACOP] to transport crude oil from the transport hub in Uganda to the port of Tanga, in Tanzania,” said Ugandan Minister for Energy and Minerals Irene Muloni, at the recent Uganda International Oil and Gas Summit (UIOGS). “The final investment decision [FID] is pending the finalisation of the legal and commercial agreements and the government, together with the oil companies, are working towards achieving this very milestone.”

While there have been disagreements between the companies and the government, Muloni continued, engagement is continuing.

“We shall keep in touch [with the oil companies] and resolve these small residual issues,” said Ugandan President Yoweri Museveni.

The project will involve the production of 230,000 barrels per day. Public hearings will be held in various districts on the EACOP plan’s environmental and social impact assessment (ESIA), from October 17 to 30. Within Uganda, the link will run for 296 km, from Kabaale in the Hoima district to the Mutukula border crossing with Tanzania. The pipe will cross 10 districts in Uganda.

At a total distance of 1,443 km, it will be the longest electrically heated pipeline in the world, keeping the crude at a temperature of 50 degrees Celsius in order to allow it to flow. Above ground, there will be two pump stations, 19 block valves and four electrical substations. The pipeline tariff will not exceed $12.77 per barrel.

Muloni also said that front-end engineering and design (FEED) work was under way on the proposed 60,000 bpd refinery and product pipeline.

Concerns had been expressed for the round given the breakdown of talks on the Lake Albert development. Tullow had agreed to sell down its stake in the country to Total and CNOOC Ltd, reducing its stake to around 11%. Following the collapse of this sale, Total suspended technical work and laid off a number of staff that had been working on the project.

In comments at UIOGS, the Petroleum Authority of Uganda (PAU) said the sector should provide support to other parts of the economy. Crucially, the government was said to be in discussions with the three oil companies on resolving outstanding issues in order to press ahead with a final investment decision (FID).

Museveni has taken a tough line in discussions with the three companies. The Ugandan president has said he had made a number of concessions to the companies’ needs, including the construction of an airport in the region and road upgrades.

The president, who was also talking at UIOGS, expressed caution, saying a number of countries had been unable to benefit enough from their oil producing assets. “We have negotiated agreements, I have already squeezed the oil companies, quite reasonably. You will not see repeated here some of the mistakes seen in other countries. For instance, the flaring of gas … it’s really irresponsible.”

A second round is under way, with roadshows to be held in London, Houston and Dubai. Bid submissions for Uganda’s second licence round are due on November 22. There are five blocks available under the round. Further out, the government is considering offering areas in northeast Uganda, in the Moroto-Kadam Basin.

In related news, Uganda’s Teclab has been contracted by Armour Energy to carry out 2D seismic in the Ntoroko District. Australia’s Armour won a block in Uganda’s first bid round, which was completed in 2016. The licence was signed in 2017, giving the company four years to carry out first phase work. This involved reprocessing existing seismic and shooting 100 km of 2D.

In Armour’s various presentations, the company has made much of the EACOP pipeline proposal.

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