An Overview of Uganda's Oil and Gas Sector

7/28/2019 An Overview of Uganda's Oil and Gas Sector

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Presented at a

Training Workshop for Senior Editors

by

Africa Centre for Media Excellence Offices, Kampala

18th September, 2012

Ernest N. T Rubondo | COMMISSIONERPetroleum Exploration and Production Department

1


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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t

PRESENTATION OUTLINE

1. Introduction2. Status of the Oil and Gas Sector

Exploration and Development

Investment

3. Legal and Regulatory Framework

4. National Oil and Gas Policy for Uganda

Basis and process of formulation

Progress of Policy Implementation (2008 to date)

5. Expectations from the Media

6. Concluding Remarks

2


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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t3

DEVELOPMENTPRODUCTION

INTRODUCTION (1)

THE PETROLEUM VALUE CHAIN

LICENSING

EXPLORATION

DEVELOPMENT

PRODUCTIONDECOMMISSIONING

UPSTREAM

DISTRIBUTION

MARKETING

SALES

TRANSPORTATION

REFINING

GAS PROCESSINGMIDSTREAM

DOWNSTREAM


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LICENSINGEXPLORATIONAPPRAISAL

DEVELOPMENTPRODUCTION

U P S T R E A M M I D S T R E A M D O W N S T R E A M

TRANSPORTATIONREFININGGAS PROCESSING

DISTRIBUTIONMARKETINGSALES

Exploration & Appraisal: Search for petroleumaccumulations , Includes Establishing presence,

Content ease of flow and Extent of distributionDevelopment: Preparing reservoir for Production,Preparing facilities for Collection and Processing

Production: Removal of petroleum from subsurfacereservoirs to the surface, Preparing petroleum forTransportation and Refining

Converting oil and gas intomarketable products andchemicals

Marketing and distribution forCustomer satisfaction and Profitearning

Efficient movement of oil and gasproducts I bulk mainly by

pipeline, road tankers, oceantankers and rail wagons

Introduction (2)

THE PETROLEUM VALUE CHAIN


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SEDIMENTARY BASINS AND THE PETROLEUM SYSTEM

Overburden Rock

Seal Rock

Reservoir Rock

Source Rock

Underburden Rock

Basement Rock

Top Oil Window

Top Gas Window

O O

Sedimentary

Basin

Fill

O

StratigraphicExtent of

PetroleumSystem

Pod of Active

Source Rock

Extent of Prospect/Field

Geographic Extent of Petroleum System

Essential

Elements

ofPetroleum

System

O OO

StratigraphicExtent of Petroleum

System

Extent of Play

SEDIMENTARY BASIN

A depression createdas a consequence ofsubsidence, that fillswith sediment

Thick layers ofsedimentary rocks getlaid down over a long

period of time

Generalized Petroleum System (Source: modified from Magoon and Dow, 1994)

Introduction (3)


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SEDIMENTARY BASINS OF AFRICA

Sedimentary Basin in Africa

Introduction (4)


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POTENTIAL FORPETROLEUM EXPLORATION

Albertine Graben1

Hoima Basin

Lake Kyoga Basin

Kadam-Moroto Basin

2

Lake Wamala Basin

Lake Victoria Basin3 LakeEdward

Lake

George

LAKE

VICTORIA

Lake

Wamala

HOIMA BASIN

LAKE WAMALA

BASIN

LAKE KYOGABASIN

LAKE

KYOGA

Sedimentary Basin in Uganda (Source: PEPD)

Introduction (5)


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1920 1945: PRELIMINARY EXPLORATION

Reporting of oil seepages

Drilling of Waki-B1 in 1938 by Anglo European

Investment Company

Shallow stratigraphic wells drilled in Kibiro,Butiaba and Kibuku based on oil seeps

8

HISTORY OF PETROLEUM EXPLORATION

1945 1980: STAGNATION

Initially due to World War II

Change in Colonial Policy

Later due to political uncertainties

Stratigraphic wells and early oil seep reporting (Source: PEPD)

Lake

Albe

rt

River Kafu

UGANDA

D.RCON

GO

0 50 km

LEGEND

Rift Sediments

International Boundary

Major Roads

Faults

Rivers

HOIMA

MASINDI

FORT PORTAL

MAHAGI

N

Oil Seep

Statigraphic Wellsown

20 N

10 N

20 N

10 N

310 E

310 E

13 Shallowwells (1956)

9 Shallow wells(1956)

20 Shallowwells (1956)

Introduction (6)


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HISTORY OF PETROLEUM EXPLORATION

1980 to Date: CONSISTENT AND MODERN EFFORTS

Aero magnetic survey carried out in 1980.

Petroleum Law enacted in 1985.

Intensive promotion led to attraction of investment

The first seismic data was acquired in the country1998 by Heritage Oil and Gas in Semliki Basin

In 2002, the Second deep well, Turaco-1 wasdrilled in the country since 1938

First Commercial discovery of crude oil in 2006

Further discoveries of new oil and gas made

Drilling of the Turaco-1 well

Introduction (7)


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STATUS OF THE OIL AND GAS SECTOR

10

EXPLORATION

AND APPRAISAL

DEVELOPMENT

AND

PRODUCTIONINFRASTRUCTURE


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The Albertine Graben is subdivided into17 Licence Areas

Five (5) Active Production SharingAgreements (PSAs)

4 License Operators (Tullow, Total,CNOOC and Dominion)

Licensing is currently on halt awaitingcompletion of a new regulatoryframework for the sector.

Future Licensing to be undertakenthrough competitive bidding

Licensees in the country changing fromsmall to major oil companies.

ACREAGE/LICENCES

RiverKatonga

River Kafu

UGANDA

TANZANIA

RWANDA

SUDAN

DEMOCRATICREPUBLIC OF CONGO

0 50 km

N

LakeEdward

Lake

Alb

ert

RiverS

emliki

LakeWamala

VictoriaNile

Alb

ert

Nile

LakeGeorge

LAKE VICTORIA

EA5B

EA2

EA3AEA3B

EA3C

EA3D

EA4A

EA4C

EA4D

EA1A

EA1

EA5A

EA4B

30 N

20 N

10 N

00

10 S

30 N

20 N

10 N

00

10 S

32 0 E31 0 E30 0 E

32 0 E31 0 E30 0 E

Status of Licensing in the Albertine Graben (Source: PEPD)

LEGEND

Rift Sediments

Open Exploration Area

EA1 Licensed to Total E&P (U) B.V,

Tullow Uganda Ltd and CNOOC (U) Ltdon 3rd February 2012

EA4B Licensed to Dominion PetroleumLtd on 27 th July 2007

Buliisa Discovery Area under appraisalby Total E&P (U) B.V, Tull owUgandaLtd and CNOOC (U) Ltd

Kingfisher production licence to TotalE&P (U) B.V, TullowUganda Ltd andCNOOC (U) Ltd on 3rd February 2012

River

International Boundary

Paara Discovery Area under appraisalby Total E&P (U) B.V, Tull owUgandaLtd and CNOOC (U) Ltd

Kaiso-Tonya Discovery Area underappraisal by Total E&P (U) B.V, Tull owUganda Ltd and CNOOC (U) Ltd

Kanywataba Prospect Area licence toTotal E&P (U) B.V, Tullow Uganda Ltdand CNOOC (U) Ltd on 3rd Feb 2012

Status of the Oil and Gas Sector(2)


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12

DATA ACQUIRED

Large amounts of geological, geophysical and engineering

data acquired by the Ministry mainly to attract investment

Over 10,000 km2

the area around the sedimentarybasins above has been geologically mapped for

petroleum exploration

7,500 line km of gravity and magnetic data

9,578 line km of aeromagnetic data

GRAVITY, MAGNETIC AND GEOLOGICAL MAPPING

50 0 50Km

(Kilometers)

Arc 1960 / UTM zone 36N

-217.9 -176.8 -158.4 -148.3 -142.4 -137.6 -132.4 -125.4 -119.8 -116.5 -111.3 -92.7

Gravity anomaly(mGals)

LEGEND

International boundary

Roads

Lakes

Exploration Areas

-100'

-030'

000'

030'

100'

130'

20

0'

230'

300'

33

0'

-1

00'

-0

30'

0

00'

0

30'

1

00'

1

30'

2

00'

2

30'

3

00'

3

30'

2930' 3000' 3030' 3100' 3130' 3200'

2930' 3000' 3030' 3100' 3130' 3200'

612-

8

0

2

-

80

2-

00

2-

29

1-

481-

481-

-1

76

6

7

1-

67

1-

-1

6

8

86

1

-

86

1-

-16

0

- 160

061-

061-

-15

2

-

1

5

2

-152

-1

52

25

1-

251

-

-

1

4

4

44

1-

4

4

1

-

441

-

-

1

4

4

44

1

-

4

4

1

-

-1

36

63

1-

6

31-

-

1

3

6

-1

36

631 -

63

1-

63

1-

-1

3

6

-

1

2

8

-1

28-

12

8

-

1

2

8

821-

-

1

2

8

82

1-

821-

-1

20

-12

0

0 2 1 -

02

1-

02

1-

0

2

1-

021

-

-

1

1

2

-1

1

2

-11

2

21

1-

211-

-1

04

-10

4

4

0

1-

-

1

0

4

401-

401-

-

9

6

69

-


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DATA ACQUIRED

LAKE VICTORIA

LakeEdward

Lake

George

Lake

Alb

ert

RiverS

emliki

RiverKatonga

RiverKafu

LakeWamala

UGANDA

TANZANIA

RWANDA

SUDAN

DEMOCRATIC REPUBLIC

OF CONGO

VictoriaNile

0 50 km

N

LEGEND

Rift Sediments

Oil well

Oil and Gas well

Gas well

Drywell

2-D seismic line

Area Boundary

3-D seismic coverage

ITI-1

AVIVI-1

NGAJI-1

MVULE-1

KINGFISHER-1KINGFISHER-2KINGFISHER-3

TURACO-1, 2 &3

MPUTA-1, 3, 4 &5

NZIZI-1, 2 &3

WARAGA-1

MPUTA-2

NGASSA1 &2

KARUKA-2

TAITAI-1WAKI-1

KARUKA-1

NSOGA-1&5

MPYO-1&3

JOBI-EAST-5

JOBI-EAST-1&2JOBI-1&2

RII-1

NGIRI-1

KASAMENE-1,2&3

NGEGE-1&2KIGOGOLE-1,2,3,4,5&6

NGARA-1AWAKA-1

Oil shows

30 N

20 N

10 N

00

10 S

30 N

20 N

10 N

00

10 S

320 E310 E300 E

320 E310 E300 E

7,194 line km of 2-D seismic data

1,608 km2 of 3-D seismic data, on land

and Lake Albert The data acquired was used to identify

hydrocarbon Prospects and Leads in theAlbertine Graben

Some of the Prospects have beenfollowed up by drilling

SEISMIC DATA



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DATA ACQUIREDWELLS DRILLED

Drilling success trend (Source : PEPD)

JOBI DISCOVERY

JOBI-1

JOBI-2

JOBI-2A

JOBI-3

RII DISCOVERY

RII-1

NGIRI DISCOVERY

NGIRI-1

NGIRI-2

NGIRI-3

MPYO DISCOVERY

MPYO-1

MPYO-3

GUNYADISCOVERY

GUNYA-1

NGEGEDISCO VERY

NGEGE-1

NGEGE-2 & 2A

NGEGE-3

NGEGE-4

NGEGE-5

NGEGE-6

NGARADISCOVERY

NGARA-1

KIGOGOLEDISCOVERY

KIGOGOLE-1

KIGOGOLE-2

KIGOGOLE-3

KIGOGOLE-4

KIGOGOLE-5

KIGOGOLE-6 &6A

TAITAI DISCOVERY

TAITAI-1

TAITAI-1A

KASAMENE &WAHRINDHI

DISCOVERIES

WAHRINDI-1

KASAMENE-1

KASAMENE-2

KASAMENE-3&3A

NSOGADISCOVERY

NSOGA-1

NSOGA-2&2A

NSOGA-5

KARUKADISCOVERY

KARUKA-1

KARUKA-2

NGASSADISCOVERY

NGASSA-1

NGASSA-2

WARAGADISCOVERY

WARAGA-1

MPUTADISCOVERY

MPUTA-1

MPUTA-2

MPUTA-3

MPUTA-4

MPUTA5

NZIZI DISCOVERY

NZIZI-1

NZIZI-2

NZIZI-3

KINGFISHER DISCOVERY

KINGFISHER-1&1A

KINGFISHER-2

KINGFISHER-3&3A

TURACO DISCOVERY

TURACO-1

TURACO-2

TURACO-3

NGAJI-1

MVULE-1

ITI-1

AVIVI-1

AWAKA-1

KANWYATABA-1


1 1 1 1

5 5

139 10 8

223

3

2

0

1

2

3

4

5

6

7

8

0

5

10

15

20

25

30

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Proje

Nu

mberofAcreages

NumberofWells

YEAR

DRILLING SUCCESS TREND IN THE ALBERTINEGRABEN

Discovery

90%

10%

DRILLING SUCCESS RATE

Success


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DISCOVERIES AND RESOURCES

20 oil and/or gasdiscoveries made to date

Over 3.5 billion barrels ofSTOIIP established

Estimated 1.0 billion barrelsof recoverable oil equivalent

Appraisal of the discoveriesis ongoing

Less than 40% of theAlbertine Graben has beenevaluated

Lake

Alb

ert

RiverS

emliki

River Kafu

UGANDA

DEMOCRATIC REPUBLICOF CONGO

VictoriaNile

Alb

e

0 50 km

N

LEGEND

Rift Sediments

Exploration Area Boundary

Oil Discovery

Oil and Gas Discovery

Gas Discovery

20 N

10 N

20 N

10 N

320 E310 E300 E

320 E310 E300 E

Kingfisher

NgassaMputaNzizi

Waraga

KasameneWaihrindiNsogaNgegeKigogoleNgara

JobiRiiNgiriMpyo

Gunya

Discoveries in the Albertine Graben (Modified from Rubondo et al., 2011 and Ongodia, 2011)



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DISCOVERIES AND RESOURCES

This resource base now put Uganda in the league of countries like Peru,

Trinidad and Tobago, Denmark, Italy and Romania

Chad, Congo Brazaville, Equatorial Guinea and Tunisia in Africa

Brunei and Thailand in Asia; among others

It is also still a long way from the tens of billion in Nigeria, Libya and the

USA or the hundreds of billions of barrels in Iran, Iraq, Kuwait, Venezuela

or Saudi Arabia



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ONGOING WORK


EXPLORATION

Kanywataba Prospect Area

The Kanywataba-1 well was drilled by CNOOC (U) Ltdin the Kanywataba Prospect area, on the southern

edge of Lake Albert The Total Depth (TD) was 2,103m BRT

Exploration Area 1A

GORE Geochemical surveys concluded during June

2012. Samples collected are currently being analyzed TOTAL E&P (U) b.v acquired Full Tensor Gradiometry

(FTG) data to further optimize on the planning for the2D and 3-D seismic survey in EA1 and 1A

Plans to commence drilling exploration wells at the end

of this year.

The Kanywataba-1 exploration well


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ONGOING WORK


APPRAISAL

Exploration Area 2

Kasamene Waraga Ngege Nsoga

Kigogole Waihrindi Ngara

Wells drilled in the Albertine Graben and discoveries made (Source: PEPD)

Exploration Area 1

Jobi Rii

Mpyo

Ngiri Gunya

Jobi-East

PRODUCTION LICENCES

Production Licence Applications have beenreceived for the Mputa and Nzizi discoveries andare under consideration. Kingfisher discoveryawaiting submission of an acceptable FDP.

JOBI DISCOVERY

JOBI-1

JOBI-2

JOBI-2A

JOBI-3

RII DISCOVERY

RII-1

NGIRI DISCOVERY

NGIRI-1

NGIRI-2

NGIRI-3

MPYO DISCOVERY

MPYO-1

MPYO-3

GUNYA DISCOVERY

GUNYA-1

NGEGE DISCOVERY

NGEGE-1

NGEGE-2 & 2A

NGEGE-3

NGEGE-4

NGEGE-5

NGEGE-6

NGARA DISCOVERY

NGARA-1

KIGOGOLE DISCOVERY

KIGOGOLE-1

KIGOGOLE-2

KIGOGOLE-3

KIGOGOLE-4

KIGOGOLE-5

KIGOGOLE-6&6A

TAITAI DISCOVERY

TAITAI-1

TAITAI-1A

KASAMENE &WAHRINDHI

DISCOVERIES

WAHRINDI-1 KASAMENE-1

KASAMENE-2

KASAMENE-3&3A

NSOGA DISCOVERY

NSOGA-1

NSOGA-2&2A

NSOGA-5

KARUKA DISCOVERY

KARUKA-1

KARUKA-2

NGASSA DISCOVERY

NGASSA-1

NGASSA-2

WARAGA DISCOVERY

WARAGA-1

MPUTA DISCOVERY

MPUTA-1

MPUTA-2

MPUTA-3

MPUTA-4

MPUTA5

NZIZI DISCOVERY

NZIZI-1

NZIZI-2

NZIZI-3

KINGFISHER DISCOVERY

KINGFISHER-1&1A

KINGFISHER-2

KINGFISHER-3&3A

TURACO DISCOVERY

TURACO-1

TURACO-2

TURACO-3

MVULE-1

ITI-1

AVIVI-1

AWAKA-1

KANWYATABA-1


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INVESTMENTS IN THE SECTOR (1)

19

INVESTMENTS MADE

1st Major Discovery

0 0 0 0 12 3

4

9

14

27

36

49

60

82

0

10

20

30

40

50

60

70

80

90

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Projections

No.

ofWellsdrilled

Investment(US$milion)

YEAR

INVESTMENT TREND IN THE OIL AND GAS SECTOR

Cummulative Investment Cuumulative No. of Wells


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INVESTMENTS IN THE SECTOR (1)

20

INVESTMENTS MADE

Industry is capital intensive and high risk

At the end of 2011 the investment made mainly in risk capital invested in seismicsurveys, exploratory and appraisal drilling was over $1.3 billion

Sharp increase in investment at first discovery

This is significant investment and will rise to many fold with further investmentsexpected in field development, production of the crude oil, processing andtransportation facilities

The costs incurred in the sector in the country so far are classified as FindingCosts

Means the costs of finding commercial reserves of oil in USD per barrel

On the global scale, the finding costs range between $5 - $25 per barrel


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RECOVERABLE COSTS

ACM BUDGETAPPROVAL

FIELD MONITORINGBY MEMD

COST RECOVERYAUDIT

APPROVAL OFPROCUREMENTPROCEDURE

The Advisory Committee

receives, considers and

approves work programme &

budget on an annual basis

To ensure that the proposed

budget is acceptable

Composed of MEMD,

MoFP&ED, MoJ&CA and the

Licensees

Licensees expected to

develop the Procurement

procedures in

consultation with GoU

MEMD currently working

with the PPDA to

develop a harmonizedProcurement procedure

MEMD monitors activities

of licensees on 24-hour

basis

To ensure that work

programme are

implemented as agreed

and in accordance withapproved budgets

The Auditor General (AG)

has overall mandate of

scrutinizing the costs

The AG finally approves the

expenditure that should be

recovered by the licensees

The AG and hence

Parliament has the mandate

to suggest improvements

where necessary

Multiple licences National Oil Company

Investments in the Sector(2)

MINIMUM LICENCEWORK PROGRAM

The PSA provides

for minimum work

programme

commitment

A minimum level of

exploration work

guaranteed by theframework


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Ugandas Petroleum Exploration and Production is Governed by:

The Petroleum (Exploration and Production) Act 1985, Cap 150,Laws of Uganda ( revised in 2000)

Petroleum (Exploration and Production) (Conduct of ExplorationOperations) Regulations, 1993

Environment, Wildlife, Water , Income Tax, Land, Statutes andGuidelines

The National Oil and Gas Policy for Uganda, 2008

22

LEGAL AND REGULATORY FRAMEWORK)


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Production Sharing Agreements

Fiscal Systems (Petroleum Contracts) used around the

world;

Concessions / Royalty/Tax Agreements

Company acquires a right to explore and develop hydrocarbons at its sole risk and

agrees to pay royalties, income taxes, petroleum revenue taxes etc in accordance

with the laws and regulations of the host govt.

The govt grants title to resource rights to the concessionaire company has all the

control on production rates and marketing (pricing and lifting).

Govt looked at as a simple tax collector


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Service Contracts

The contractor is paid a fee for services.

Title to the petroleum stays with govt

These are mainly at the stage of production, after

discovery because then the risk is reduced

Production Sharing Agreements(2)


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Production Sharing Agreements (PSAs)

Basic elements

The company is a contractor to host govtHost govt and contractor share in all productionTitle to the resource remains with government until the

point of saleGovt maintains control of operations (usually through

a national oil company) either directly or through amanagement committee

The contractor required to provide technology andfinancing

Production Sharing Agreements (3)


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(PSAs) contd

Equipment purchased and imported by the contractorbecome property of government

Exploration expenditures met by the contractor onlyrecoverable in case of a discovery

Company bears the entire exploration riskGovt has option to participate and be carried through

development to productionRing-fencing costs incurred in one contract area or field

cannot be recovered from production from anothercontract area or fieldCost recovery or cost oil limit



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(PSAs) contd

Profit oil and gas sharing revenues remaining afterroyalty and cost recovery shared between government andthe contractor

The contractors share of profit oil and gas is taxed

27


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Why we Chose PSA

Title to petroleum remains with Government

Govt has a say on production rates (very key), marketing

etc

Capacity to monitor the expenses had not been built

Secure early revenues to government through royalty and

cost recovery limit and therefore early share of profit

THE NATIONAL OIL AND GAS POLICY


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The National Oil and Gas Policy (NOGP) is thekey document providing guidance to the Oil andgas sector in Uganda.

It was developed to address issues ofexploration, development, production andutilisation of the countrys oil resources followingthe discovery of commercial oil reserves in 2006.

NOGP was approved by cabinet in January 2008after a thorough consultative process.

29

THE NATIONAL OIL AND GAS POLICY

FOR UGANDA


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Key Policy objectives for the oil and gas sector before the National Oil and GasPolicy for Uganda were covered in the Energy Policy of 2002 and these were;

1.Capacity building and institutional development,

2. Investment promotion through acquisition of field geological, geophysical andgeochemical data and attraction of oil companies to invest; and

3. Monitoring compliance of agreed work programs, budgets and environmentprotection.

The discovery and confirmation of commercial reserves of petroleum in the countrybrought about new issues that necessitated putting in place a NATIONAL OIL ANDGAS POLICY for the country.

30

National Oil and Gas Policy for Uganda (2)


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Policy Goal:TO USE THE COUNTRYS OIL AND GAS RESOURCES TO

CONTRIBUTE TO EARLY ACHIEVEMENT OF POVERTY

ERADICATION AND CREATE LASTING VALUE TO SOCIETY.

Policy has ten objectives, each with strategies and actions.

Policy available in print and website;www.petroleum.go.ug

An abridged and translated version of the policy is being developed.

31

National Oil and Gas Policy for Uganda (3)


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1. Efficient Licensing Objective 1

On-going formulation of new petroleum legislation

Presentation of new petroleum legislation in parliamentFebruary 2012 (Petroleum(Exploration, Development and Production) Bill2012 and Petroleum (Refining, GasProcessing and Conversion, Transportation and Storage) Bill).

Halt in licensing of new acreage since first discovery in 2008.

Over 10,000 km2 out of 20,000 km2 originally licensed area with high productive

potential has been relinquished in addition to available unlicensed areas. Over

16,000 km2 is now available for licensing.

Over 80 applications received are kept in data bank.

Due diligence undertaken on these and some companies purchase data and reportsafter signing confidentiality agreements

Gradual and Competitive licensing as a way of prolonging production and

efficient resource management.

Open Bidding Rounds will be the form of licensing

32

Status of Policy Implementation (2008 to 2012)


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2. Establish and Manage Countrys Resource Potential

Objective 2

Resources in 2006 were 300 million barrels of oil in place.

Today the resources are over 3.5 billion barrels of oil in

place and over 1.0 billion barrels are recoverable.

The National Petroleum Data Repository Systems areunder establishment.

Creation of new institutions (Petroleum Authority, National

Oil Company, Directorate of Petroleum)-once bills are

passed into law. Strengthening existing institutions :

33

Status of Policy Implementation (2)

DATA REPOSITORY CENTREDATA REPOSITORY CENTRE

INHOUSE DATA INTERPRETATION


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3. Efficient production Objective 3

No commercial production yet, but an extensiveExtended Well Testing (EWT) programme beingundertaken.

Issued a production licence for Kingfisher field(February 2012) to be effective in one year.

Government has received:

Applications for production licences over

Waraga, Kingfisher, Nzizi and Mputa fields andthese are being reviewed.

Oil Companies are due to submit

Field development plans for Kasamene,

Wahrindi, Kigogole, Nsoga, Ngege and Ngara.34



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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t35 Refinery Distribution in Africa (Source: CITAC)

Two strategies;

a) Early Commercialization Integrated Power Project

b) Refinery Development


4. Valuable utilisation of the resources Objective 4


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Early Commercialization Integrated Power

Project

Value Addition and Integrated Power Project

Pre-FEED activities including geotechnical surveysfor infrastructure for the gas processing centre andpipeline routes have been completed

Power Generation

Deliver natural gas as the initial feedstock to supplya 50MW dual power station

Additional to gas, crude oil (HFO) from extendedwell tests to increase capacity and life of the projectto 25 years

Potential industry markets for the test crude are

also being explored

Test Crude from:Jobi, Rii, Ngiri

Test Crude from:Kasamene, Nsoga, Ngege,Kigogole, Wahrindi

MputaWaragaNzizi

KABALE POWERPLANT


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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t37 Refinery Distribution in Africa (Source: CITAC)

A Regional Refineries Development

Strategy (RRDS) was developed andapproved in 2008 by EAC memberstates

The strategy aims at:

Harmonized planning anddevelopment of refineries in the East

African Community

Sustainable utilisation of crude oilresources in the region.

EAC has only one refinery of 70,000bbl/d but operates at 35,000bbl/d.

The region is currently consumingclose to 200,000 bbl/d and demand isgrowing

Refinery Development


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Refinery Development (2)

Value Addition and Refinery Development

A detailed refinery feasibility study for thedevelopment of a refinery in Uganda was

conducted in 2010/11 and assessed;Crude production potentialNational and Regional Petroleum Product

DemandRefinery size and configurationLocationFinancing options

The study analysed the option of crude export pipelineverses refinery development

Study confirmed that refinery development is moreeconomically feasible and beneficial than export of crude oil

Six different locations were assessed and Kabaale (29Km2),close to the oil fields in Hoima district was recommendedbased on the waxy crude type that is difficult to transportover long distances

Feasibility Study for Refining (Source: MEMD)


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Base case refinery of 60,000 bbl/d was recommended

Phased development to be considered starting with 20,000 bbl/day Capacity to be expanded in future to 60,000 bpd and to 120,000 bpd or 180,000 bpd

NPV for base case 60,000 bbl/d US $ 3.2 billion, Post tax rate of return of 33%

Crude export pipeline tariff (60,000 bbl/d) at post tax ROR of 10% is US$ 13.35/bbl

Feasibility study is now available for purchase

Mild Hydrocracker / FCC / Coker and HCK/ Coker design options are being considered

Processes of Acquisition of land in Kabaale, Buseruka Subcounty, Hoima for refinerydevelopment is on-going;

Survey of the land was undertaken by the Ministry of Lands Housing & Urbandevelopment (MoLHUD)

Sensitisation of affected communities is on-going and preparation of the ResettlementAction Plan.

Procurement of a Transaction Advisor for the Refinery on-going

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Medium-large refinery



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REFINERY DEVELOPMENT STEPS

FEASIBILITY STUDY

COMMISSIONING

Land Acquisition

Logistics Assessment Study

Environmental Baseline Study

Identify Developer

FEED

Detailed EIA

EPC

2011 2015 (Expected commissioning of Phase-1)

Government to work with partners withtechnical knowledge and required capitalthrough Private Public Partnership (PPP)



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Benefits of Refining in Uganda

Reduce over reliance on foreign importation of petroleumproducts

Help alleviate fuel shortages and facilitate regionaleconomic growth

Provide employment to local and national population esp.at construction stage

Infrastructure development in the local areas e.g. Roads,health centers



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5: Promotion of suitable transport and

storage solutionsObjective 5

A petroleum transportation and storage study for thecountry has commenced.

A study to evaluate development of pipelines andstorage facilities for crude oil and gas in Ugandahas been concluded.

Two routes; Northern and Southern to a centralhub/refinery - Northern (96 km, 16 inch) andSouthern (46 km, 12.75 inch)

The second part of the study will covertransportation and storage of petroleum productsfrom the refinery to markets is ongoing and will becompleted this year.

Commencement of the construction of Kaiso-TonyaRoad and design of other roads is ongoing.

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6: Collection of the right revenues and utilisation to create lasting value Objective 6

Petroleum Revenue Management Policy in place.

Public Finance and Accountability Act (PFA) reviewed to put in place legislation for

petroleum revenue management; PF bill tabled in Parliament

Tax legislation updated and Macro-Economic Framework is being revisited.

Capacity Building in tax policy/ administration and Petroleum Fund Asset

Management.

Resolution of tax dispute on the sale of Heritage assets is an example of an effort to

ensure collection of right revenues

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7. Optimum National Participation Objective 7

Concluded a study on the opportunities and challenges forUgandans participation inthe oil and gas sector in September 2011 and recommendations are under

implementation.

Copy of the study is on www.petroleum.go.ug

Oil companies are being compelled to employ Ugandans and give business

opportunities to Ugandan companies.

Several aspects of local content have been included in the petroleum resource bill.

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NATIONAL PARTICIPATION IN THE OIL AND


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OPPORTUNITIES FOR THE COUNTRY

NATIONAL PARTICIPATION IN THE OIL AND

GAS SECTOR (1)

Production Sharing Agreements (PSAs) provide for State Participation in therange of 15% to 20%

This provides an important opportunity to optimize value for the country inthe oil and gas activities by directly participating in, among others; Decision Making

Controlling of Costs

Capacity Building in strategic ,managerial and technical roles of the industry

IOCs80%

Government(max)

20%

MAXIMUM RANGE OF STATE PARTICIPATION

National Participation in the Oil and Gas


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NATIONAL ENTREPRENEURS


Sector(2)

SERVICES TYPE UGANDAN SUPPLIERS

CIVIL WORKS/

ENGINEERING

Kagga & Partners Tegeka ConstructionPearl Engineering Kasese Nail & Wood LtdExcel Construction Strategic Logistics

MEDICAL Frontier Medical AON Uganda LtdMusalaba Mwekudu

CLEARING AND

FORWARDING

Bemuga ForwardersThree ways shipping services Co.Momentum LogisticsEast Africa Cranes

Environment services Amec Earth and Environment ServicesAir water and Earth.Environmental Assessment ConsultantsRHK CONSULTING Engineering LTD

SECURITY G4S securitySaracen

CATERING Mineral Services LimitedEquator Catering servicesJose Catering

Mining Services Limited

National Entrepreneurs are actively involved in provision of

services in the sector. Examples;



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Sector(3)

Well pad services Communications

1. Excel Construction Ltd2. Kasese Nail & Wood LTD

3. Strategic Logistics

4. Pearl Engineering Limited

1. MTN Uganda Ltd2. Orange Uganda Ltd

Environment services(Consultations) Rig Services( Movement and Mud logging)

Amec Earth and Environment Services

Air water and Earth.

Environmental Assessment Consultants

RHK CONSULTING Engineering LTD

1. Three ways

2. Multiline International

Freight Forwarders/Courier services Equipment lifting services

1. Bemuga Forwarders.

2. Momentum Logistics

3. Three ways Shipping services

1. East Africa Cranes Ltd

2. Bemuga Forwarders

Engineering services Office Facilities and EquipmentKagga & Partners

Pearl Engineering

MBW Consultants

Excel construction

Tegeka Companies

Service and Computer Industries Ltd

Uganda Printing and Publishing

Uganda Railways Corporation

MSL Logistics

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Sector(4)

Well pad services Communications

1. Excel Construction Ltd2. Kasese Nail & Wood LTD

3. Strategic Logistics

4. Pearl Engineering Limited

1. MTN Uganda Ltd2. Orange Uganda Ltd

Environment services(Consultations) Rig Services( Movement and Mud logging)

Amec Earth and Environment Services

Air water and Earth.

Environmental Assessment Consultants

RHK CONSULTING Engineering LTD

1. Three ways

2. Multiline International

Freight Forwarders/Courier services Equipment lifting services

1. Bemuga Forwarders.

2. Momentum Logistics

3. Three ways Shipping services

1. East Africa Cranes Ltd

2. Bemuga Forwarders

Engineering services Office Facilities and EquipmentKagga & Partners

Pearl Engineering

MBW Consultants

Excel construction

Tegeka Companies

Service and Computer Industries Ltd

Uganda Printing and Publishing

Uganda Railways Corporation

MSL Logistics

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EMPLOYMENT BY OIL COMPANIES Licensed companies in the country

are employing an increasingnumber of Ugandans

Tullow employees a total of 203people out of which 80% areUgandans

CNOOC plans to employee 115people out of which 70% areUgandans

Total plans to employ a total of 178people out of which 60% are

expected to be Ugandans These numbers are expected to

increase as more Ugandansacquire skills in the oil and gassector.


Sector(5)



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INTERNATIONAL OIL SERVICES COMPANIES

Some of the worlds largest oil service companies now resident andhave opened bases and yards in the country;

Schlumberger; US$79.57 billion

Halliburton; US$24.64 billion

Baker Hughes; US$16.74 billion

Weatherford; US$8.91 billion

These service companies are also providing training and employmentopportunities to Ugandans


Sector(6)

St t f P li I l t ti


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Skills requirement study for the oil and gas in the country hasbeen planned and is due to be undertaken starting later this

year.

Commencement of Uganda Petroleum Institute Kigumba

artisans and technicians.

First intake of 28 students is due to graduate during 2012 and areundergoing industrial training in Trinidad and Tobago

Second intake of 60 students commenced studies during 2011.

Undergraduate and post graduate studies in Petroleum

Geoscience at Makerere University.

The third intake of 80 students commenced studies in 2012/13

Second intake of 46 and first intake of 50 students commenced

studies in 2011/12 and 2010/11 respectively

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Support to Makerere University by Schlumberger with US$ 4m for technical software, hardware and training

Private institutions introducing petroleum related courses.

Increased training of Ugandans in oil and gas professions abroad for both public and private players

8. Development and Maintenance of National Skills and Expertise - Objective 8

St t f P li I l t ti


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9. Environment Conservation Objective 9

Environment and Social Impact Assessment studies are undertaken for all activities in thesector.

Environment Sensitivity Atlas for the areas where petroleum has been discovered in thecountry was developed.

Strategic Environment Assessment of these areas is on-going.

Environment Monitoring Plan and guidelines have been developed.

Oil spill Contingency Plan and mechanism for hazardous waste management plan is on-going.

Multi-Institutional monitoring team - Biodiversity Institutions working together to efficientlymanage the interface between petroleum and the environment.

Updating of standards, guidelines and regulations by biodiversity institutions

Land use planning is in progress. The Albertine Graben is a special planning area; Planning52



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10. Mutually beneficial relationships among

stakeholders- Objective 10 A communication strategy for the sector was

developed and its Implementation is on-going through;

1. Engagements with Civil Society, Parliamentand other stakeholder groups

2. Engagements with leaders and communitiesof districts in the Albertine Graben

3. Participation in Radio and Television talkshows

4. Pro-active Media Relations

5. Website www.petroleum.go.ug

Consultations and dialogue withstakeholders continues.

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Editors at Jobi-3 well site in Murchison Falls National Park in July 2012
http://www.petroleum.go.ug/http://www.petroleum.go.ug/


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Action (iii) of Objective 10 of the NOGP provides for putting in place a Communication

Strategy for the Oil and Gas Sector .

The objectives of the strategy are to;a) Bring about communication leadership, and foster a coordinated approach to communication by multiple

actors.

b) Meet the information needs of the stakeholders through regular information dissemination, exchange andsharing.

c) Promote an accurate and balanced image of the oil and gas sector through proactive communication.

d) Establish an implementation structure to synchronise internal communication within the MEMD, betweenother government institutions active in the sector and other stakeholders.

Can be accessed on www.petroleum.go.ug

Provides for, among others, Specific Engagement with the Media; Training, Meetings,field visits, Press conferences, Media Contact List, Designated a spokesperson, amongothers:

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COMMUNICATION STRATEGY
http://www.petroleum.go.ug/http://www.petroleum.go.ug/


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a) Engagements Organised;

Breakfast meeting for Senior Editors (40) on 31st

August, 2011 Workshop for News/ Business Reporters (50) on 2nd September, 2011

Training Workshop for Parliamentary Reporters (65) on 28th November 2011

A breakfast meeting for Editors (50) and a Workshop for Journalists (65) were held on 28thMarch 2012 and 30th March 2012 respectively;

Improve awareness about the developments in the Oil and Gas Sector Enhance communication flow between Government and media

Update the on the recent developments

b) Engagements Facilitated;

Various training workshops for journalists organised by the African Centre for Media Excellence

(ACME) held on 21st Nov, 2011, 30th January, 14th May, 21st

August, 2012. A training for reporters organised by UEJA on 28th October, 2011

A presentation made to the Senior Editorial Staff of the New Vision on 8th May 2012 with theview to improve the reporting on oil and gas issues by their staff and also develop partnershipswith the experts and their organizations.

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Communication Strategy (2)


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c) Media Visits to Operations in the Albertine Graben

1. Following an orientation Workshops for the Media, MEMD organised two visits to the Albertine Grabenfor 25 journalists, which was undertaken between 19 th to 22nd January 2012 and for 20 Editors and 5journalists between 19th and 22nd July, 2012.

2. Facilitated a three field visits for journalists undergoing a training programme on oil and gas reportingunder ACME. The visits took place on 5th and 18th February, 2012, and 29th April, 2012.

d) Designated spokesperson for the Ministry

Mr. Bukenya Matovu, Senior Assistant Secretary/ MEMD has been delegated the responsibility of a beingthe official spokesperson for the Ministry, including on oil and gas issues and is accessible to the mediafor comment on various issues.

OBJECTIVES OF PROACTIVE MEDIA RELATIONS;

Improve awareness about the developments in the Oil and Gas Sector

Enhance communication flow between Government and media

Update the on the recent developments Challenge of high staff turnover in the media mitigated organising and facilitating such engagements.

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Communication Strategy (3)


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Appreciate the progress and achievements that have been made in the sector.

Oil and Gas Industry Characteristics (High Risk Industry, High Reward, Capital intensive, Internationaland has potential to disrupt other sectors and can also be easily disrupted) require responsible media toavoid disruption of the sector and contribute to managing expectations.

Be proactive in reporting about the oil and gas sector and ensure objective coverage of the sector.

Seek the correct information from the right sources to avoid misrepresentations based on selfishinterests; Get the right mix between political debates and expert information; there is tendency to relymore on politicians than experts for media stories.

Network with key actors in the sector and obtain information with them to the extent that does not offendyour professionalism in order to deploy reporters optimally and for key tasks. Key actors include MEMD,

Finance, Parliament, Oil companies, NEMA, UWA, URA etc.

Find space and airtime in your channels for the sector, even when there are no "fireworks" around thesector to give people information. Oil stories make interesting reading/listening.

Work closely with the MEMD and PEPD Communications Office to ensure information flow.

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EXPECTATIONS FROM THE MEDIA

CONCLUDING REMARKS (1)


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CONCLUDING REMARKS (1)

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The intensive promotional and exploration efforts to establish Ugandas petroleum potential were

successful as commercially exploitable reserves of oil and gas were confirmed in the country.

Investment in the sector was over US$1.3 billion at the end of 2011 and the resources discovered

in the country to date are now estimated to be about 3.5 billion barrels of oil in place.

Given the drilling success rate and cost of finding oil in the country so far the exploration effort has

been efficient.

Efforts are now being made to commercialize the discovered resources, initially through power

generation and subsequently through refining of the crude oil

Investment in the sector is expected to increase especially as preparation of the infrastructurerequired for production is put in place.

Employment opportunities for Ugandans in the oil and gas sector will increase as the country

progresses into field development and production

C l di R k


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Concluding Remarks (2)

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The key challenges in the sector include the general publics anxiety andexpectation and the need to put in place an appropriate institutional and

regulatory framework for the sector.

These and other challenges in the sector are well identified and described in

the countrys oil and gas policy and therefore implementation of this policy

should go along way in addressing these challenges.


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COMMISSIONERPetroleum Exploration and Production Department

Ministry of Energy and Mineral Development

Email: [email protected]

An Overview of Uganda's Oil and Gas Sector

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