Final Investment Decision: The risks, opportunities for Ugandans

TotalEnergies and the China National Offshore Oil Corporation (CNOOC) on Tuesday agreed on a deal with Uganda National Oil Company (UNOC) and Tanzania to invest more than $10 billion (about shs 36 trillion) in developing crude oil production in East Africa.

The agreement was announced by TotalEnergies Chairman and CEO Patrick Pouyanne at what was described as “a historic event “ that was held at Kololo Independence Grounds on Tuesday.

The project will seek to unlock Uganda’s energy resources and will culminate into building a vast regional oil pipeline network in Uganda and through Tanzania to carry Uganda's crude oil to a port on the Indian Ocean.

The Minister for Energy, Ruth Nankabirwa, said on Tuesday that this Final Investment Decision (FID) will now clear the way for the export of several barrels of oil.

Nankabirwa said that the FID also officially marked the start of the Engineering, Procurement and Construction (EPC) phase by the partners, and therefore this is a commitment to see that Uganda sees its first oil by 2025.

“It is during this phase that we expect Ugandans to accrue significant benefits and opportunities from the sector through local content,” Nankabirwa said.

Although there are concerns that in the next 20 years, the market for cars that use fuel to run will have gone down in favour for electric cars and therefore affecting the market of oil, President Museveni, while speaking at the signing of the FID downplayed these comments and said that the shift to clean energy will not have a big toll on Uganda’s oil.

Museveni welcomed the FID and noted that it will be a huge boost for Uganda’s economy, before he officially launched the FID.

Benefits

With the signing of FID, construction works on the Tilenga, Kingfisher and the EACOP (East African Oil Pipeline) can now take off with TotalEnergies, CNOOC, UNOC and Tanzania Petroleum Development Corporation (TPDC) as the venture partners.

The project has at least six oil fields and according to Nankabirwa and these are expected to produce up to 200,000 barrels of crude oil per day.

The fields are expected to be connected to a Central Processing Facility (CPF), where the crude oil will be separated from all impurities before being fed into the EACOP.

Irene Bateebe, the Permanent Secretary of the Energy Ministry said they undertook a feasibility study on the viability of commercial oil and based on that study, there is a market.

Bateebe added that Ugandans who have been alert are probably ready to benefit.

“We are locking in on tier one contracts. Are you registered on the National database?” Bateebe asked.

“No one will come knocking on your door that here is an opportunity. Have your ears on the ground,” she added.

According to Bateebe, the oil project is statistically the most capital intensive venture in Uganda’s post independence era.

It is expected that during this phase, in the run up to the first oil in 2025, the several multi billion contracts and tenders will push Uganda in the next phase of its economic growth.

Experts said that the GDP will be expected to grow to about $40.1 billion (shs 139 trillion) by the end of the 2022/23 Financial Year.

World Bank also estimated that with the commercial oil production at its peak, Uganda might earn up to $3 billion (which is about shs 7 trillion) in revenue from oil exports per year.

Projections from the Petroleum Authority of Uganda (PAU) show that Ugandans can expect to make up to $4.2b (Shs 13 trillion) per annum through the provision of goods and services.

According to PAU, it is estimated that the project will create 14,000 direct jobs and over 45,000 indirect jobs for Ugandans of which 57 percent of the direct jobs will go to Ugandans.

Speaking to NBS Television on Tuesday evening shortly after the launch of the FID, Proscovia Nabbanja, the UNOC boss said that about 16 services in the oil and gas sector had been ring fenced for Ugandans to participate in.

Risks

Yet not all is rosy.

With the project expected to emit at least 33 million tones of Carbon-dioxide per year, environmental groups and scientists have warned rhat the project is incompatible to the goals of the Paris Climate Accord.

The project threatens the livelihood of several people, especially those who live near the path of the pipeline.

Omar Elmawi who is the Coordinator of the Stop EACOP said that they hope that this project can still be averted, since it threatens the social, environmental, cultural, health, livelihood, climate and economic impacts to both Tanzania and Uganda and its citizens while most, if not all of the economic benefits will find their way to TotalEnand CNOOC.