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PROGRESS ON PETROLEUM EXPLORATION AND DEVELOPMENT IN UGANDA at the OIL DEVELOPMENT, ENVIRONMENTAL CONSERVATION AND LIVELIHOODS; CIVIL SOCIETY COALITION.

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Presentation on theme: "PROGRESS ON PETROLEUM EXPLORATION AND DEVELOPMENT IN UGANDA at the OIL DEVELOPMENT, ENVIRONMENTAL CONSERVATION AND LIVELIHOODS; CIVIL SOCIETY COALITION."— Presentation transcript:

1 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 MINISTRY OF ENERGY AND MINERAL DEVELOPMENT

2 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department PRESENTATION OUTLINE 1. Introduction: Current Status 2. Legal and Regulatory Framework 3. Infrastructure Development 4. National Participation 5. Way forward 6. Challenges 7. Concluding Remarks 2

3 STATUS OF THE OIL AND GAS SECTOR 3 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 Kingfisher Ngassa Mputa Nzizi Waraga Kasamene Waihrindi Nsoga Ngege Kigogole Ngara Jobi Rii Ngiri Mpyo Gunya Jobi-East Lyec Discoveries in the Albertine Graben (Source: PEPD)

4 STATUS OF THE OIL AND GAS SECTOR 4 Appraisal Areas in the Albertine Graben (Source: PEPD) 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 STATUS OF UPSTREAM ACTIVITIES

5 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department STATUS OF THE OIL AND GAS SECTOR 5 Drilling success trend (Source : PEPD) 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 23 0 – 33 0 API with very low sulphur and is waxy 1.2 EXPLORATORY AND APPRAISAL DRILLING

6 STATUS OF THE OIL AND GAS SECTOR 6 Drilling success trend (Source : PEPD) 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 countrys oil and gas sector Expected to increase significantly during development, production, refinery development and attendant pipelines development 1 st Commercial Discovery

7 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department ONGOING PROMOTION EFFORTS 1. STATUS OF THE OIL AND GAS SECTOR Participating in and presenting papers at International fora such as at AAPG, SEG, Africa Upstream and EAPCE13. 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 © Petroleum Exploration and Production Department, Uganda 8 2. THE LEGAL AND REGULATORY FRAMEWORK The National Oil and Gas Policy (2008) Available on: NATIONAL OIL AND GAS POLICY PETROLEUM LEGISLATIONS PETROLEUM REGULATIONS PSA POLICY LAWS The Petroleum (Exploration, Development and Production) Act, 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 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 REGULATIONS

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

10 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department 10 Refinery Distribution in Africa (Source: CITAC) Ugandas 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 It recommended a refinery should be developed in Uganda. 3.1 Refinery Development 3. PLANS FOR INFRASTRUCTURE DEVELOPMENT

11 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department 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/ Medium-large refinery Refinery Development; Progress PLANS FOR INFRASTRUCTURE DEVELOPMENT (2)

12 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department 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 12 Medium-large refinery Refinery Development; Land Acquisition PLANS FOR INFRASTRUCTURE DEVELOPMENT

13 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department 13 PLANS FOR INFRASTRUCTURE DEVELOPMENT REFINERY DEVELOPMENT MILESTONES

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

15 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department 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. 15 REFINER Y Refinery Refined products pipeline PLANS FOR INFRASTRUCTURE DEVELOPMENT PIPELINES AND TRANSPORTATION FACILITIES

16 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 i. Northern route: 97km, 16-inch and, ii.Southern route: 46km, 12.5 inch Cost of pipelines estimated at $185M PIPELINE DEVELOPMENT 16 PLANS FOR INFRASTRUCTURE DEVELOPMENT

17 17 2. Crude Export Pipeline Three possible routes were evaluated i.Northern route to Lamu Port in Kenya, 1380km long ii.Central route to Mombasa, 1300km long iii.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 PLANS FOR INFRASTRUCTURE DEVELOPMENT

18 18 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 countrys citizens are part and parcel of the development process. NATIONAL PARTICIPATION

19 Strategies to ensure National Participation 1.Regulation of inflow of expatriates; expatriate workers must acquire work permits. 2.Requirement to develop Nationalisation Plans for expatriate positions 3.Approval of organisation structures for oil companies 4.Streamlining the procurement procedures for oil companies 5.Production Sharing Agreements (PSAs) provide for State Participation in the range of 15% to 20% 6.Several aspects of national participation have been included in the new petroleum legislation. 7.Capacity Building and Skills Development 8.Ministry is developing a National Content Policy 19 NATIONAL PARTICIPATION

20 20 NATIONAL ENTREPRENEURS National Entrepreneurs are actively involved in provision of services in the sector in the following areas; 1.Civil Works and Engineering, 2.Medical Services, 3.Clearing and Forwarding, 4.Environment Services (Consultancy and Waste Handling). 5.Security, 6.Catering and Camp Management 7.Freight Forwarders/Courier services 8.Rig Services( Movement and Mud logging) 9. Office Facilities and Equipment 10.Equipment lifting services 11.Engineering services 12.Communications and ICT NATIONAL PARTICIPATION

21 21 EMPLOYMENT BY OIL COMPANIES 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. Hundreds of semi-skilled and unskilled workers are employed from the local communities during operations NATIONAL PARTICIPATION

22 22 INTERNATIONAL OIL SERVICES COMPANIES Some of the worlds 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 NATIONAL PARTICIPATION

23 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department Newly recruited workers undergoing survey training by BGP personnel in preparation for the 3D data acquisition 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 COMMUNITY PARTICIPATION Hundreds of semi-skilled and unskilled workers are employed from the local communities during operations

24 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department Development of regulations to support the new upstream and midstream Acts; to be in place during 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 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 24 Medium-large refinery 6. WAY FORWARD

25 Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department 7. CONCLUDING REMARKS 25 Ugandas 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 For Further information: Permanent Secretary, Ministry of Energy and Mineral Development


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