KAMPALA — Mr. Robert Kasande the Permanent Secretary in the ministry of energy and mineral development has said that government of Uganda is committed to development and production of oil and gas after recent developments in the sector created anxiety among the general public both within and outside the country.
Tullow Oil last month announced the expiry of the Sale and Purchase Agreement (SPA) by which Tullow Uganda Operations Pty Ltd was farming down 21.5% of its shares to Total E&P Uganda and CNOOC Uganda Ltd.
This followed failure by the Joint Venture Partners (JVPs) and the government to agree on the tax treatment of the transaction.
Subsequently, Total indicated the suspension of activities on the East African Crude Oil Pipeline (EACOP) Project that is supposed to transport crude oil from the export hub in Hoima in Uganda to the port of Tanga in Tanzania.
Mr. Kasande admitted that Tullow’s action affected contractors and sub-contractors whose services are equally suspended.
This website understands that both Total and CNOOC are also reported to have started laying off some staff.
The developments affect the taking of the Final Investment Decision (FID) for the Tilenga and Kingfisher Projects (Upstream) and EACOP Project which was expected in the course of this year.
“It is therefore important that the momentum that was generated by government’s issuance of petroleum production licenses to the oil companies in 2013 for Kingfisher Development Area (KFDA) and 2016 for Tilenga needs to be revived to facilitate the achievement of FID and development of the sector,” he said in a statement.
At the issuance of the PLs in 2016, Government and the IOCs agreed to several milestones to achieve FID. This included identification of areas that needed action from either side to achieve FID and First Oil.
He said that government committed to upgrade the identified roads, facilitate grant of certifications and approvals among others.
In this regard, Mr. Kasande said that government is investing more than one billion United States dollars (USD 1 Billion) dollars to construct more than 700 kilometers of roads, constructing an international airport in Hoima which will not only support transportation of equipment for the oil and gas sector but also support agriculture and tourism in the region and country at large.
Mr. Kasande said that works for 4 out of 6 of the critical road packages are in progress, and the works at the airport are on target to have a usable runway by the end of 2020.
He noted that government has also worked to ensure the conclusion of the Environmental and Social Impact Assessment (ESIA) for the Tilenga project and is finalizing that for the Kingfisher Development Area and EACOP Projects.
Key among others, holding Public Hearings for the Tilenga and Kingfisher projects in the project areas, the issuance of permits for water abstraction is pending finalization of additional feasibility studies.
Regarding the EACOP project, he explained that the government is closely working with the government of Tanzania with which it facilitated the feasibility studies that enabled selection of the route and negotiation and signature of an Inter-Governmental Agreement (IGA) that provides an attractive package of incentives for the project, in 2017.
Uganda and Tanzania are currently negotiating Host Government Agreements with the project sponsors and committed all the state entities responsible to facilitate conclusion of the process and to expedite any necessary approvals.
“This clearly shows government’s commitment to seeing that the JVPs undertake FID and that the projects give a reasonable return on investment. This should be achieved while maintaining intergenerational value, and in line with the legal framework. Government will therefore continue to engage and support the oil companies to resume and continue with activities on all the projects together with all stakeholders to find optimal and lasting solutions to any bottlenecks to the progress of the sector.”
He added: “Therefore, whereas the prolonged negotiations may push back oil production, as a country, our primary focus should be on ensuring that the journey towards first oil is one that brings in optimal value and benefit to the country and the investors. The projects that are to be sanctioned for close to three decades, and their impact should last beyond their lifecycle for current and future generations.”
Mr Kasekende said this will enable the country to achieve its goal of using oil and gas to achieve early eradication of poverty and create lasting value to society