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Progress on petroleum exploration and development in Uganda

MINISTRY OF ENERGY AND MINERAL DEVELOPMENT. Progress on petroleum exploration and development in Uganda. at the OIL DEVELOPMENT, ENVIRONMENTAL CONSERVATION AND LIVELIHOODS; CIVIL SOCIETY COALITION ON OIL AND GAS (CSCO) STAKEHOLDER DIALOGUE HOTEL AFRICANA KAMPALA, 14 TH February 2014.

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Progress on petroleum exploration and development in Uganda

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  1. MINISTRY OF ENERGY AND MINERAL DEVELOPMENT Progress on petroleum exploration and development in Uganda at the OIL DEVELOPMENT, ENVIRONMENTAL CONSERVATION AND LIVELIHOODS; CIVIL SOCIETY COALITION ON OIL AND GAS (CSCO) STAKEHOLDER DIALOGUE HOTEL AFRICANA KAMPALA, 14TH February 2014

  2. PRESENTATION OUTLINE • Introduction: Current Status • Legal and Regulatory Framework • Infrastructure Development • National Participation • Way forward • Challenges • Concluding Remarks

  3. STATUS OF THE OIL AND GAS SECTOR RESOURCE BASE • 21 oil and/or gas discoveries made in the Albertine Graben • 18 discoveries taken forward for appraisal • Appraisal for 10 of the discoveries completed, and applications for production license submitted • One Production Licence (Kingfisher) approved during September 2013 • Appraisal of the remaining 8 discoveries still ongoing and is expected to be completed by end of 2014 Jobi Rii Ngiri Mpyo Gunya Jobi-East Lyec Kasamene Waihrindi Nsoga Ngege Kigogole Ngara Ngassa Mputa Nzizi Waraga Kingfisher Discoveries in the AlbertineGraben (Source: PEPD)

  4. STATUS OF THE OIL AND GAS SECTOR STATUS OF UPSTREAM ACTIVITIES • TOTAL E&P Uganda B.V • Has submitted application for one Production license – Ngiri Discovery • Appraisal of six discoveries in EA1 & 1A • Tullow Uganda Operations Pty Ltd • Has submitted application for Production License for eight discoveries in EA2 • Appraising one discovery in EA2 • CNOOC Uganda Ltd • Production License for the Kingfisher Field approved. • Development in Progress Appraisal Areas in the AlbertineGraben (Source: PEPD)

  5. STATUS OF THE OIL AND GAS SECTOR 1.2 EXPLORATORY AND APPRAISAL DRILLING • 115 exploration and appraisal wells drilled in the Albertine Graben to date • 101 wells encountered hydrocarbons • Drilling success rate of over 85% • 36 exploration wells and 79 appraisal wells • 28 wells have been flow tested • Crude blend between 230 – 330 API with very low sulphur and is waxy Drilling success trend (Source : PEPD)

  6. STATUS OF THE OIL AND GAS SECTOR UPSTREAM CAPITAL INVESTMENTS • Investment by industry in seismic surveys, exploratory and appraisal drilling is projected at over US$2.5billion by the end of 2013 • Sharp increase in investment after first commercial discovery • This investment has been important in progressing the country’s oil and gas sector • Expected to increase significantly during development, production, refinery development and attendant pipelines development 1st Commercial Discovery Drilling success trend (Source : PEPD)

  7. 1. STATUS OF THE OIL AND GAS SECTOR 1.5 ONGOING PROMOTION EFFORTS • Participating in and presenting papers at International fora such as at AAPG, SEG, Africa Upstream and EAPCE’13. • Preparing to undertake a multi-client (non-exclusive) seismic survey over unlicensed areas • Commencing analysis of other sedimentary basins in the country. • Undertaking assessment of the oil and gas resources for all discoveries and compilation of country resource report.

  8. 2. THE LEGAL AND REGULATORY FRAMEWORK POLICY The National Oil and Gas Policy (2008) LAWS • The Petroleum (Exploration, Development and Production) Act, 2013 - Enacted in April 2013 • Petroleum (Refining, Conversion, Storage and Transportation) Act, 2013 – Enacted in July 2013 • Formulation of a Bill for the management of petroleum revenues (The Public Finance Bill) on going and the Bill is currently in Parliament • Other relevant statutes and guidelines such as Environment , Wildlife, Water, Income Tax, land NATIONAL OIL AND GAS POLICY PETROLEUM LEGISLATIONS PETROLEUM REGULATIONS PSA REGULATIONS • Petroleum (Exploration and production) (Conduct of Exploration Operations) Regulations, 1993 • New Petroleum Regulations expected by June 2014 to address aspects of Exploration, Development, Production, HSE, NC and Midstream among others Available on:www.petroleum.go.ug

  9. OTHER REGULATORY TOOLS USED • 2.2 Other Practical Tools used to Regulate the Petroleum Upstream Sector • Assessment of Technical Submissions: Review of Field Development Plans; Well proposals, drilling programs, seismic survey plans, among others. • Monitoring of Costs of Petroleum Operationsand Review of Work Programs and Budgets. • Monitoring Field Activities on a full time basis and holding regular operational meeting between Government and the licensed companies. • Monitoring Compliance of the Licensees; to the Laws, Regulations, PSAs and other regulatory instruments through a License Management System. • Documenting and categorising the country’s petroleum resources. • Management of Petroleum Data. • Guidelines to support these tools have and continued to be developed.

  10. 3. PLANS FOR INFRASTRUCTURE DEVELOPMENT 3.1 Refinery Development • Uganda’s petroleum products consumption during 2012 was 27,000 bbl/day • Regional consumption is about 200,000 bbl/day with a growth rate of 7%. • Region has only one refinery with a capacity of 70,000 bbl/day but has been operating at half capacity. • Reduced security of supply and high import bill of about 1 billion USD annually. • The EAC strategy for development of regional refineries was adopted by Partner States in 2008. It recommended a refinery should be developed in Uganda. Refinery Distribution in Africa (Source: CITAC)

  11. PLANS FOR INFRASTRUCTURE DEVELOPMENT (2) Refinery Development; Progress Medium-large refinery • Feasibility study for the development of a green field refinery in Uganda confirmed that developing a refinery in Uganda was profitable. • Government procured a Transaction Advisor (Taylor DeJongh from USA) to support structuring of the refinery development and source a lead investor. • Refinery to be developed on a Private – Public Partnership (PPP) basis • RFQ issued in October 2013 and six firms and/or consortia have been shortlisted. The Ministry issued a detailed RFP during January 2014 to the six bidders: • Consortium led by China Petroleum Pipeline Bureau • MARUBENI Corporation (Japan); • Consortium led by PETROFAC (UK/UAE); • Consortium led by RT – Global Resources (Russia); • Consortium led by SK Energy (Korea); and • Consortium led by VITOL (Switzerland). • Lead investor to be procured by June 2014 and the first phase of the refinery (30k bopd) expected in 2017/18.

  12. PLANS FOR INFRASTRUCTURE DEVELOPMENT Refinery Development; Land Acquisition Medium-large refinery • Processes of acquiring land in Kabaale, Buseruka Subcounty, Hoima for refinery development is on-going; • Survey of the land was undertaken by the Ministry of Lands, Housing and Urban Devt. • Sensitisation of affected communities and undertaking a Resettlement Action Plan in 2012 • RAP approved and implementation commenced in July 2013 with verification, disclosure of compensation values, livelihood improvement and financial management training and identification of resettlement areas. • Payment of compensation packages commenced in December 2013 and will be concluded in the first half of 2014 as sensitisation continues • Environment baseline survey has been completed

  13. PLANS FOR INFRASTRUCTURE DEVELOPMENT REFINERY DEVELOPMENT MILESTONES 2012 - 2014

  14. PLANS FOR INFRASTRUCTURE DEVELOPMENT BASIN WIDE DEVELOPMENT Jobi Rii Ngiri Kasamene Nsoga Kigogole Waihrindi Ngassa Mputa Waraga Kingfisher

  15. PLANS FOR INFRASTRUCTURE DEVELOPMENT PIPELINES AND TRANSPORTATION FACILITIES • A study to evaluate development of pipelines and storage facilities for crude oil and gas in Uganda has been concluded; Two routes; Northern and Southern to a central hub/refinery • Plans are underway to develop a 205km refined products pipeline from the Refinery to Buloba, west of Kampala where a terminal is planned. • Roads, water, electricity and other infrastructure in the Albertine Graben are being upgraded. Refined products pipeline Refinery REFINERY

  16. PLANS FOR INFRASTRUCTURE DEVELOPMENT PIPELINE DEVELOPMENT • 1. Crude Transportation Pipeline to refinery • The study to evaluate development of pipelines and storage facilities was completed in 2012; • Two routes (Northern and Southern) to a central hub/Refinery were identified • Northern route: 97km, 16-inch and, • Southern route: 46km, 12.5 inch • Cost of pipelines estimated at $185M

  17. PLANS FOR INFRASTRUCTURE DEVELOPMENT 2. Crude Export Pipeline • Three possible routes were evaluated • Northern route to Lamu Port in Kenya, 1380km long • Central route to Mombasa, 1300km long • Southern route to Dar es Salam, 1950km long • The actual sizing of pipeline and detailed routing to be completed with a view of regional infrastructure development once commercialization plans are finalized

  18. NATIONAL PARTICIPATION • Government strongly encourages National Participation as one of the optimum ways to ensure sustainable development through: • Partnering with the Ugandan investors, • Use of local goods and services and • Contribution to development of skills and expertise through employment and training in line with the industry quality and safety standards. • This is important because sustainable development ultimately requires that a country’s citizens are part and parcel of the development process.

  19. Strategies to ensure National Participation NATIONAL PARTICIPATION • Regulation of inflow of expatriates; expatriate workers must acquire work permits. • Requirement to develop Nationalisation Plans for expatriate positions • Approval of organisation structures for oil companies • Streamlining the procurement procedures for oil companies • Production Sharing Agreements (PSAs) provide for State Participation in the range of 15% to 20% • Several aspects of national participation have been included in the new petroleum legislation. • Capacity Building and Skills Development • Ministry is developing a National Content Policy

  20. NATIONAL PARTICIPATION NATIONAL ENTREPRENEURS National Entrepreneurs are actively involved in provision of services in the sector in the following areas; Civil Works and Engineering, Medical Services, Clearing and Forwarding, Environment Services (Consultancy and Waste Handling). Security, Catering and Camp Management Freight Forwarders/Courier services Rig Services( Movement and Mud logging) Office Facilities and Equipment Equipment lifting services Engineering services Communications and ICT

  21. NATIONAL PARTICIPATION EMPLOYMENT BY OIL COMPANIES Hundreds of semi-skilled and unskilled workers are employed from the local communities during operations Licensed companies in the country are employing an increasing number of Ugandans Tullow employed a total of 203 people in 2013, out of which 80% are Ugandans CNOOC plans to employee 115 people in 2014 out of which 70% are Ugandans Total employs over 500 people out of which 80% are Ugandans These numbers are expected to increase as more Ugandans acquire skills in the oil and gas sector.

  22. NATIONAL PARTICIPATION INTERNATIONAL OIL SERVICES COMPANIES • Some of the world’s largest oil service companies are now resident and have opened up 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 employment opportunities to Ugandans

  23. 5. COMMUNITY PARTICIPATION Hundreds of semi-skilled and unskilled workers are employed from the local communities during operations Employment • Majority of these jobs will be through indirect employment. • Employment curve for the oil and gas industry is such that employment increases during the development stage where a lot of infrastructure is put in place. • Acquisition of certified vocational skills is therefore important as these stage will require artisanal and technical skills. • As the activities progress towards actual production, more highly skilled labour is required and high technology utilized, with less man-hours. • Emphasis for communities therefore is to focus on employment but also service provision. • Causal labour sourced from the local community and provide opportunity to build skills Newly recruited workers undergoing survey training by BGP personnel in preparation for the 3D data acquisition

  24. 6. WAY FORWARD Medium-large refinery • Development of regulations to support the new upstream and midstream Acts; to be in place during 2014. • Preparations for Licensing through competitive bidding rounds starting with areas with good data coverage is going on • The Ministry will undertake speculative surveys in the unlicensed areas to inform the fiscal terms. • Establishment of the Petroleum Authority and National Oil Company await appointment of the board by the President. The board will be approved by Parliament. • National Content Policy to be developed through a consultative process. • Procurement of a lead investor for the refinery to be concluded in the first half of 2014. • Development of a National Strategic Plan for Pipelines development has commenced. • Development of an implementation plan for the Strategic Environment Assessment will follow its adoption by Cabinet. • Continue with implementation of the communication strategy for the oil and gas sector • Implementation of the Monitoring and Evaluation Framework for the NOGP

  25. 7. CONCLUDING REMARKS • Uganda’s oil and gas sector is taking shape, the regulatory for the upstream sector has been finalized, institutional framework is being put in place to manage the resources and the infrastructure to support the development is being built. • Taking forward the sector will require joint and harmonized efforts on the part of the respective stakeholders. • The Ministry of Energy ad Mineral Development recognizes and appreciates the support by other Government Institutions, Oil Companies, Development partners, Civil Society and other stakeholders in the implementation of the different aspects of the National Oil and Gas Policy for Uganda.

  26. THANK YOU • For Further information: • Permanent Secretary, Ministry of Energy and Mineral Development • Email: psmemd@energy.go.ug • pepdebb@petroleum.go.ug/communications@petroleum.go.ug • www.petroleum.go.ug

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