President Yoweri Museveni on Tuesday launched an oil rig assembled by China National Offshore Oil Corporation (CNOOC) Uganda Limited on the shores of Lake Albert, setting the stage for long-anticipated commercial oil drilling in the country.
It was a historic day in Uganda’s oil exploration and production journey, which was started a century ago by British colonialists, who were unsuccessful.
Commercially viable oil was discovered in 2006 in Albertine Graben in Western Uganda, along the shores of Lake Albert, which borders Uganda and Democratic Republic of Congo (DRC).
China, France involvement
Museveni appreciated China and France for standing with Uganda despite the project suffering ”smear campaigns” for years.
CNOOC Uganda Limited and Total E&P Uganda, subsidiaries of Chinese state-owned and Paris-headquartered Total, are major players in the project. Total Energies holds 56.67%, CNOOC 28.33%, and Uganda 15% through Uganda National Oil Company.
Total, the majority shareholder, is developing the Tilega oil project, which is estimated to produce 190,000 barrels per day when production starts. CNOOC’s kingfisher site will produce only 40,000 barrels per day as per government estimates.
“Most of these companies like CNOOC are owned by the Chinese government and when they come here, they are being encouraged by the [Ugandan] government,” Museveni said.
“France has not given us trouble. For [the] European Union parliament, we told them to go to hell, but the French government did not cause us any problems.”
In September last year, the EU passed a resolution calling for the delay of the construction of 1,443km East Africa Crude Oil Pipeline (EACOP), which will transport Uganda’s oil to Tanzania’s coastal port town of Tanga for export. The resolution triggered massive uproar from government officials.
Resistance from climate activists
Museveni’s announcement was meant to be celebratory, but not for climate activists who have been repressed for years. The government blocked a public dialogue that had been scheduled to take place at a Kampala hotel on Tuesday.
Police were heavily deployed amid erected barricades on the road leading to the hotel that turned away guests, including veteran opposition politician Kizza Besigye, who was to be a guest speaker. Police said the organisers needed a clearance from the inspector general for the event.
Deliberately misleading heading and story!
It’s as if only Besigye was blocked from a debate that took place.Truth is that the Police and Military barricaded the hotel since last night and nobody made it inside- including the organisers!
These acts of impunity must stop! 🟥 pic.twitter.com/CCtSTrQGw2
— Kifefe Kizza-Besigye (@kizzabesigye1) January 24, 2023
Brian Atuheire Batenda, executive director of African Initiative on Food Security and Environment (AIFE-Uganda), an NGO which had organised the dialogue, says the government has not allowed checks on the oil project nor been accommodative of alternative views.
“They have used all impunity in oil developments and they are using contested environmental and social impact assessments,” Batenda tells The Africa Report.
“They are developing these projects before they even compensate for people’s lands. They are arresting activists that are speaking on these matters.”
Batenda added that 17 climate activists were arrested in 2022 for protesting against oil development.
Supersonic speed
With no financial challenges and beyond the reach of climate activists, CNOOC moved at a fast speed in assembling the requisite infrastructure for oil production. Chinese ambassador to Uganda Zhang Lizhong described it as “China’s largest investment project”.
It took less than a year after the signing of the final investment agreement to have the rig ready.
“CNOOC Uganda Limited held a groundbreaking ceremony to commence construction […] on […] 11 February 2022,” said Ernest Rubondo, the executive director of the Petroleum Authority of Uganda.
“Many of you recall that this was only 10 days after the announcement of [the] final investment decision for the country’s oil and gas project. The company is now commencing drilling of production wells less than one year after FID.”
What lies ahead
Rubondo revealed that investment in development of the kingfisher oilfield is expected to cost over $2bn in the next three years.
$346m was invested in the kingfisher project in 2022, bringing the total cumulative investment in the project to $1.07bn at the end of last year. About $580m is expected to be invested in kingfisher in 2023 and a similar amount in 2024.
At the current price of roughly $87 per barrel, Rubondo said the kingfisher will account for about 15% of the total oil revenues, which the government expects to receive from its oil and gas resources. “This will bring a total of $6.9bn to government coffers over the entire period of the project. This is averaging $360m per year,” he says.
Total is expected to invest roughly $7bn in the project that it is developing before production.
Rubondo also revealed that 92 contracts worth almost $1bn have been approved for the kingfisher project since February 2022. Contracts worth $270m have been awarded to Ugandan companies, mainly in areas of civil works, hospitality management, transportation and ICT.
On jobs status, he said 1,500 people are being employed for the project – 1,300 are Ugandans, including about 500 are from the communities surrounding the project.
Needed infrastructure
For oil to get to the market, Uganda will have to construct a crude oil pipeline. It’s the pipeline that has been a major target of climate activists. A licence for the construction of the pipeline was also issued on Tuesday.
The substantial responsibility to raise funds for the project, which is estimated to cost $4bn, lies with Total Energies. The company holds 62% of the pipeline shares while the rest is owned by Uganda, Tanzania and China National Offshore Oil Corporation.
Another target is a refinery. The government also has a plan to construct a 60,000-barrel-per-day refinery to refine oil for domestic and regional consumption.
Despite the refinery project being offered in 2018 to Albertine Graben Refinery Consortium – a group of mainly American companies, including General Electric – not much progress has been made. Not even the front-end engineering designs have been completed.
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