Uganda on February 24, 2023, launched and commenced the drilling of wells, which will produce crude oil from the Kingfisher oil field in Kyangwali Sub-County, Kikuube District, a process described as a significant milestone towards Uganda becoming a major oil and gas producer.
It is also said that the process is a big step towards realizing the commercial oil production target of 2025.
The Kingfisher Oilfield Development Area, operated by the Chinese National Offshore Oil Cooperation (CNOOC), is one of the 21 oil and gas fields which have been discovered in Uganda to date. It is also among the 14 fields granted a licence for production.
The oil field is about 15km long and 3km wide and is about 2km below Lake Albert. The oil field is estimated to have a total of 560 million barrels of oil in place, out of which, 190 million barrels of oil (33%) is expected to be produced over a period of 20-25 years.
The oil field is expected to have a maximum production of 40,000 barrels of oil per day for five years after which, production will begin to decline.
According to the Field Development Plan approved by the Minister of Energy and Minerals, Ruth Nankabirwa, when production at the oilfield begins to decline, the company will start production from the three oil fields; Waraga, Mputa and Nzizi in the Kaiso Tonya Area.
The Petroleum Authority of Uganda (PAU) says the Production from these three oil fields will enable maintaining production at the Kingfisher project. Production from these fields will be transported by pipeline to Kingfisher for processing.
Speaking at the well-spudding ceremony, Ernest Rubondo, the Executive Director of the Petroleum Authority of Uganda, said the launched drilling rig, will be used to drill all the planned 31 production wells of the Kingfisher oil field.
20 of these wells will be used to produce oil while 11 of the wells will be used to inject water into the reservoir to help improve production.
He said the rig was specially designed for the kingfisher field and is the strongest that has been used in the country to date, consuming about 6 megawatts of power.
The wells to be drilled in the Kingfisher field will vary from 2600m to 7400 metres in length depending on how far the targeted part of the reservoir is from the location, where the drilling will start.
Rubondo said that the Investment in the development of the Kingfisher oilfield is expected to cost over US$ 2 billion over the next 3 years until shortly after production starts and over US$1.5 billion over the remaining 20 years of the life of the oil field.
He added that US$ 346 Million was invested in the Kingfisher project in 2022 bringing the total cumulative investment in the project to US$ 1.07 billion at the end of 2022.
Rubondo further notes that About $580 Million is expected to be invested in the Kingfisher Development Area in 2023 and a similar amount in 2024.
He said the project is employing over 1500 people, out of whom, 1,300 are Ugandans and about 500 are from the communities surrounding the project. According to PAU, over 5000 Ugandans have been trained in different oil and gas courses and are ready to be employed in the sector.
Rubondo added that on top of employing and training Ugandans, 92 contracts totalling close to US$ 1 billion have been approved by the Authority for the Kingfisher project since taking the Final Investment Decision in February 2022.
Adding, “Out of these, contracts worth US$ 270 million have been awarded to Ugandan companies mainly in areas of civil works, hospitality management, transportation and ICT.”
Rubondo noted that many Ugandan companies have been able to get updated technologies.
He said this is mainly through joint ventures, “Out of the 30 joint ventures which the Authority has approved, six are being implemented at the Kingfisher project. These are in the areas of waste management, civil works, logistics and provision of medical services.
“These joint ventures which are between Ugandan and international companies are facilitating the transfer of technology to the Ugandan partners in the joint ventures,” he said.
Meanwhile, Peninah Aheebwa, an Energy Economist and the Director of Technical Support Services at PAU, says Studies have shown that every US$ 1 directly invested in the oil and gas sector is expected to yield indirect growth of the GDP by US$ 0.6.
“Therefore, a direct investment of US$ 15 Billion dollars (33% of Uganda’s current GDP estimated at US$ 45.7 Billion) in the oil and gas sector is expected to yield indirect growth of the GDP by close to US$ 9 Billion (close to 20% of current GDP) by the time first oil is achieved,” Aheebwa noted.
Aheebwa adds that through the exploitation of sectoral linkages and national content, Uganda’s economy could cement its middle-income status even before the first oil.
“The definition and exploitation of the linkages with Agriculture, Financing/Insurance, Manufacturing, Education, Transport, Tourism, Health, Land Use Planning and Housing is already ongoing,” she says adding, In terms of agriculture, there is an opportunity to exploit the demand expected to be created by the workforce, the population influx of over 1miilion people brought into the region by push factors, and the export market because of the second international airport in the region.
The following investment opportunities are required to tap into these markets.
The Vice President of CNOOC Uganda Ltd, Chen Zhuobiao, said with the launch, locals will get more job opportunities during the well drilling and the completion process.
Zhuobiao added that more Ugandans will be trained for the oilfield development stage and bring tangible changes to local communities.
Zhuobiao noted that with oil drilling they will also support Uganda to become an important crude oil producer in East Africa which will bring tangible changes to the local economy.
While presiding over the function, President Yoweri Museveni reiterated the government’s commitment to using oil and petroleum resources carefully for a long time now that Uganda has got capacity and expertise on what to do in the oil and gas sector.
Peter Banura the Kikube district LCV Chairman, sought interventions into issues that will lead to maximizing the potentialities that come with the oil resource.
He asked for the extension of ferry services to ease transport and business opportunities between Uganda and the Democratic Republic of Congo, connecting more towns to the nation’s electricity grid and more funds to further develop the infrastructure in the district.
Elison Karuhanga, an advocate and partner at Kampala Associated Advocates, says the development of Uganda’s oil industry also has the potential to create new opportunities for the country’s tourism sector.
He writes that with increased economic growth and investment, Uganda’s tourism industry can benefit from improved infrastructure, increased marketing, and expanded tourism offerings.
“The oil industry can provide a valuable source of investment and revenue for Uganda’s tourism sector. We should all promote the country’s economic growth and sustainability by showcasing how the energy and tourism industries can coexist and benefit each other. These projects and our continued transformation provide a very good reason to VisitUganda,”
With the other rigs to be installed at Tilenga, and managed by TotalEnergies, Uganda aims to start commercially pumping its oil reserves at the end of 2025.
This also follows the signing of the final investment decision to develop Uganda’s oilfields by TotalEnergies and CNOOC.
Uganda discovered crude reserves estimated at 6.5 billion barrels, with 1.4 billion recoverable, recoverable. In addition, gas resources are currently estimated at 600 Billion Standard Cubic Feet (BCF).
A key element of Uganda’s oil project is the crude oil export pipeline to run from Uganda to the Indian Ocean at Tanga and Tanzania, whose construction licenses have been given to the EACOP company by both Uganda and Tanzania.
Leave a Reply