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Standoff Between Government And Oil Companies Pushes First Oil To 2022

Previous plans by government to have its first oil by 2020 have proved futile as oil companies; have up to-date not made the Final Investment Decision (FID) that is supposed to enable them kick off production.

Tullow Oil, CNOOC and Total E&P, the main shareholders in the Albertine Graben are expected to make the FID in 2019 instead of the original planned timeline of 2017-2018.

According to the Minister For Energy and Mineral Development, Eng. Irene Muloni, the delay is mainly because the Government of Uganda and the Oil companies have not yet agreed on the cost of transportation of the crude oil in the 1445km  East African Crude Oil Pipeline (EACOP) from Hoima to the port of Tanga in Tanzania.

The oil companies have put the cost of transportation per barrel at about 14-15 US Dollars contrary to what they had initially agreed with government which is 12US Dollars as per the economic model presented for the preference of the Tanga Route over the Lamu route through Kenya which was estimated at 15US Dollars per barrel if the pipeline was to pass through Kenya.

“Four rounds of negotiations between the Host Governments (Uganda and Tanzania) and the lead project sponsors (Oil Companies) have been held since February 2018. We are looking at the Business principal and the Economic model for the project together with the allocation of revenues to both the Refinery and EACOP,” minister Muloni said.

She added that once the tariff for the transportation for each barrel is agreed on, then the Host Government Agreement will be signed and the oil companies will be expected to make the FID there after.

Muloni noted that Uganda is being careful on the whole process that will lead to the First oil because it wants to reap the most benefits from these oil agreements.

“The biggest question with in the public remains the timing of the first oil. We all need to appreciate that significant progress has been made in taking forward the process leading to the first oil. Our aim is to produce maximum benefits to the country by ensuring that oil and gas products are produced efficiently” she said.

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Muloni was speaking at the End of year press briefing in Kampala for the oil and gas sector.

The Minister who was flanked by officials from Petroleum Authority of Uganda ( PAU) and Uganda National Oil Company (UNOC) noted that a new resource Optimization study has put the total amount of Oil in Uganda at 6bn barrels instead of the initially estimated at 6.5bn barrels.

However the amount of recoverable oil has remained at 1.4bn barrels.

“The change in the reported resources is attributed to the resource optimization studies which have been undertaken as part of the technical studies for the Tilenga and Kingfisher projects. Reported resources depend on the interpretation of the available data at the time and may therefore, change as more data becomes available,” said Muloni.

The optimisation studies have seen a reduction in the Stock Tank Oil Initially in Place (STOIIP) volumes for some fields, and positive STOIIP changes in other fields. As a result, there was a cumulative net loss of approximately 467 MMbbls and hence reduction in global STOIIP from approximately 6.5bn barrels to 6.0bn barrels.

The Albertine Graben is Uganda’s main source of Oil at the moment with over 21 oil fields, 14 of these are already under development.

This is only 10% of the Albertine Graben. 90% of its field is still unlicensed.

Muloni said Government was expecting to start the second licensing round in 2020 to establish additional petroleum resources to enable sustainability of the oil production.

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