business

Local contractors to hook $300m from Kingfisher oil well

94 1

By April 2025, 40,000 barrels of oil will be coming out of the Kingfisher oil wells in Buhuka village, Kikuube district, engraving Uganda’s name among the world’s oil-producing countries and brightening its financial fortunes.

Work at the wells has already commenced following the signing of the Final Investment Decision between the Government and the joint venture partners early this month, with China National Offshore Oil Corporation (CNOOC) contracting a Ugandan company to undertake the PC1 civil works.

According to Chen Zhuobiao, the president of CNOOC Uganda, the $23m project includes the construction of well pads, access roads, and water intake points, and will last for approximately a year.

Although approximately $2.32b is to be spent on the project, over the next four years, local contractors and suppliers may not reap that much, as they are incredibly limited by both capacity and knowledge gaps.

New Vision has established that only about 13% of the entire oil cake for the kingfisher project will be shared among local suppliers and contractors, with about 85% of the cake expected to fly abroad, along with the foreign contractors.

“This is one of the projects on which more than $2b is going to be spent.

The whole King Fisher project is going to cost about $2b and as the regulator, we are proud to see that part of it is going to a Ugandan contractor. We are aware that there are many aspects of the $2b that is not going to go to Ugandans because of capacity and knowledge,” Earnest Rubondo, the executive director, Petroleum Authority of Uganda (PAU), said.

He said of the $2.32b to be invested in the kingfisher oil well development, Ugandan companies are expected to bag about $300m, emphasized by the national content laws for the oil and gas sector.

He said as the regulator, PAU is committed to working with all stakeholders in the sector, to ensure that the national resource is developed in a sustainable and desirable way while creating lasting value for Uganda.

“We try to ensure that these activities create lasting value for Ugandans, sometimes we have to bear in mind that the investors have to realise a benefit from the investment while appreciating our country as an attractive investment destination. However, sometimes, these aspirations don’t go together,” he said.

CNOOC which jointly owns Uganda’s oil fields with France’s Total energies is charged with the development of the Kingfisher wells, which it obtained from Britain’s Tullow in 2012.

Initial works to be done by Excel Construction, the Ugandan company contracted at $23m under PC1 phase, including demolition of existing wall pads, earthworks, installation of conductor pipes, construction of new wall pads, and other reinforcement concrete works, drainage and road works.

The private sector, civil society speak out

According to Jane Nalunga, the executive director of Southern and Eastern Africa Trade Information and Negotiations Institute, the country needs to strategise to increase its stake in the entire oil and gas project.

She said in order to renegotiate from a vantage position, our financial position needs to be better, which at the moment seems distant.

“The most likely alternative is for the private sector to increase its visibility in the oil and gas activities in order to improve their participation in the sector. At the moment, they seem obscured and that explains why they are taking very little from this oil and gas project,” she said.

Nalunga said, on the other hand, the government needs to support the enterprises by mobilising them and availing cheaper credit because, at the moment, they are small, weak, and have little capital.

The Private Sector Foundation Uganda (PSFU) publicist, Cathy Lindoha, said although local participation of the private sector is still small, efforts are underway to increase their stake in the oil and gas sector.

She said mobilisation and sensitisation aimed at encouraging the private sector to register on the national oil and gas database is going on and is expected to yield good results in the medium to long term.

Lindoha said their members are also being encouraged to formalize their businesses and form partnerships in order to secure opportunities from the international oil companies, which prefer to work with larger and more organised entities.

“We have, for instance, spoken to the transport and logistics players, the manufacturing sector, welders, and a number of others by ensuring that they get sufficient training to participate in these activities,” she said.

According to Lindoha, PSFU has also partnered with international trainers and certifiers, such as City and Guild, to train Ugandan entrepreneurs on quality as is required in the oil and gas sector.

She said through a loan from the World Bank, PSFU is working with the education ministry to train a number of Ugandans under the Skills Development Facility (SDF) to participate in the oil and gas sector.

“I recognised that we still need to do more. In time, however, our efforts will pay off, and more Ugandan companies will participate not only in the oil and gas sector but in the entire mineral development programme,” she said.

The Minister of Energy and Mineral Development, Ruth Nankabirwa, urged the oil companies to adhere to and enhance the national content, saying it is key to Uganda’s social-economic development.

She also told them to continuously work with the government for the full exploitation of Uganda’s oil and gas resources.

“We look forward to first oil in early 2025, and the full exploitation of our natural gas resources, which will save our forests and environment,” Nankabirwa said.

She said at production, some of the oil will be piped to the refinery at Kabaale in Hoima, with the other significant amount piped to Tanga in Tanzania.

“Here, we are expecting 40,000 barrels per day, while at Tilenga, it will be 120,000 barrels per day, making a sum of 230,000 barrels per day. In Uganda, we expect to process 60,000 barrels at the refinery. The rest will be exported as crude oil,” she said.

Nankabirwa said about 300,000 tonnes of gas, which will come off the production chambers, will be turned into liquefied petroleum gas and sold locally as a means to fight the use of biomass.

“We are also telling the world that when our gas starts flowing, Uganda will use it to replace biomass as a means of cooking. Uganda used to be so green, but it is changing because people are cutting down trees for biomass,” she said.

Over the next few decades, both Total Energies and CNOOC are expected to extract more than a billion barrels of commercially recoverable oil from the Lake Albert region.

Development of the resource, which includes the construction of the 1,443km pipeline to Tanga port in Tanzania, the longest heated pipeline in the world, is also set to begin this year, with the first oil expected in 2025.

The project will bring $15b of investment into Uganda, with more than $4b expected to flow into the coffers of Ugandan companies.

1 Comments

  • Ivars

    Ivars

    4:39 AM, 30-03-2022

    Looks like Uganda will be very rich country in the near future.

    0 Reply

Leave a Comment

Related News