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Oil Agreements Open Up Opportunities For Ugandans

President Samia Suluhu of the United Republic of Tanzania and Uganda’s President Yoweri Museveni Museveni at State House Entebbe. They signed oil and gas agreements

The recent conclusion of key oil and gas agreements has opened up opportunities for the participation of Ugandans. Speaking at a press conference, Dr. Kitutu Kimono Mary Goretti (MP), the Minister of Energy and Mineral Development (MEMD) highlighted specific areas that are now a reality for Ugandans who would like to work, or provide goods and services to the industry.

“Ugandan companies will greatly benefit from the involvement of world-class oil service companies, expected Joint Venture Partnerships and sub-contracting opportunities,” she said. Dr. Kitutu added that Ugandan companies can expect to progressively gain capabilities to provide technical services that have hitherto been a preserve of the more experienced foreign companies.

Dr. Kitutu also noted that the conclusion of the key oil agreements has de-risked all the other upcoming projects including the refinery and the new exploration projects.

“The development of the Upstream projects guarantees the supply of feedstock into the refinery, while the pipeline and the refinery provide evacuation options for future oil discoveries in the new exploration areas,” she said.

The significant investment that has now been unlocked into Uganda’s economy includes the implementation of the Tilenga Project in Buliisa and Nwoya districts (approximately US$4 billion); the Kingfisher Project in Hoima and Kikuube Districts (approximately US$1.5 billion); and, the East African Crude Oil Pipeline (EACOP) that will cross the ten (10) districts of Hoima, Kikuube, Kakumiro, Kyankwanzi, Gomba, Mubende, Lwengo, Sembabule, Kyotera and Rakai in Uganda (approx. US$3.6bn). This is in addition to what Government is already investing in the required support infrastructure, including Hoima International Airport (over US$500m) and 700 kilometres of oil roads (approx. US$900m).

Dr. Kitutu also noted that the conclusion of these key agreements for the EACOP is a major requirement for the announcement of the Final Investment Decision (FID).

“There is no document that will be signed for, or called, “FID”; the project launch on Sunday, 11th April, 2021 at State House, is a demonstration of the commitment the respective Governments and oil companies have for the projects. With these agreements in place, the oil companies and Government will proceed with the approval and award of contracts to the main Engineering, Procurement and Construction (EPC) contractors” the Minister stressed.

Mr. Robert Kasande, the Permanent Secretary, MEMD, noted that the runway at the Hoima International Airport is almost ready.

“Any equipment needed in the short term will continue to come in by road. However, the airport has made significant progress and will be ready by the time delicate and/or voluminous equipment are required fast by the projects,” he said.

By the end of the construction phase, Uganda’s GDP will be significantly boosted through sectoral linkages by close to USD 9 Billion. This is a 22% increase of the current GDP, which is expected to reach USD 40.1 Billion in 2020/21.

Another key benefit from the oil and gas sector is the employment of Ugandans. About 14,000 people will be directly employed by the companies, while about 45,000 people will be indirectly employed by the contractors. An additional 105,000 people will benefit from induced employment based on the utilisation of other services by the oil and gas sector. Of the direct employment, 57% are expected to be Ugandans, which is expected to result in an estimated USD 48.5 million annual payment to Ugandan employees.

Mr. Dozith Abeinomugisha, Ag. Executive Director, Petroleum Authority of Uganda (PAU) illustrated the labour needs of the industry with a description of the past industrial baseline survey.

“With maturity of projects over the years, the studies and designs have painted a clearer picture of the specific work requirements. This year, we shall carry out and complete a new industrial baseline survey that will shed more light on the labour needs,” he said.

Mr. Abeinomugisha also urged Ugandans who would like to work in, or supply goods and services to the sector, to register on the National Supplier Database (NSD) and the National Oil and Gas Talent Register (NOGTR).

“Globally, the countries that have done well in the oil and gas sector are those whose citizens have participated,” he noted.

Currently, contracts worth USD 167 million out of the USD 1.362 billion Recommendations to Award (RTAs) for the Tilenga and Kingfisher projects that have been presented to the PAU, will be awarded directly to Ugandan companies. This accounts for only nineteen (19) out of the over thirty (30) work packages to be awarded by the Licensees. There are also many more subcontracts given to Ugandan companies through subcontracting by the Level-1 contractors.

On behalf of the investors in Uganda’s oil and gas sector, Mr. Pierre Jessua, the General Manager, Total E&P Uganda Limited, reiterated their commitment to promoting national content development in the implementation of the oil and gas projects.

“We are dedicated to building the capacity of Ugandans in the oil and gas industry through knowledge exchange and training with the expertise available to us,” he said.  

At least 28% of the USD 15 billion (equivalent to USD 4.2 Bn) investment during the development and construction will go to Ugandan companies through provision of various goods, services and works.

Key agreements concluded on Sunday, 11th April, 2021:

  1. The Uganda Host Government Agreement (HGA) between the Government of Uganda and the East African Crude Oil Pipeline (EACOP) Company – signed by Dr. Kitutu Kimono Mary Goretti (MP), the Minister of Energy and Mineral Development (MEMD) on behalf of the Government of Uganda, and Mr. Martin Tiffen, the General Manager of the East African Crude Oil Pipeline (EACOP) Company, on behalf of EACOP Co. The HGA concluded the legal framework and contractual obligations between Uganda as the host country, and EACOP Co. as the project company Co.;
  2. The Shareholders Agreement (SHA), which defines the rights and responsibilities of the shareholders in the EACOP Co. The shareholders are: the Uganda National Oil Company (UNOC) with 15%; the Joint Venture Partners (Total Holdings International B.V. with 62% and CNOOC Uganda Limited with 8%) and the Tanzania Petroleum Development Corporation (TPDC). TPDC will take shareholding of up to 15%. The SHA is significant because it has constituted the EACOP Company, and will now guide the funding of shareholding, finance structure and general governance of the company; and,
  3. The Tariff and Transportation Agreement (TTA), which defines the rights and responsibilities of the shippers on the one hand, and the transporter on the other hand. The TTA was signed between the transporter, EACOP Co., and the Shippers of the crude oil who are the Government of Uganda, UNOC, Total E&P Uganda Limited and CNOOC Uganda Limited.
Taddewo William Senyonyi
https://www.facebook.com/senyonyi.taddewo
William is a seasoned business and finance journalist. He is also an agripreneur and a coffee enthusiast.

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