Following the adoption of the 2020 International Maritime Organisation regulations, experts say that Uganda’s oil will attract a first-rate price tag on the international market.
Experts explained that the oil and gas resources that have been discovered in Uganda to date, are close to 6.5 billion barrels in place in the Albertine Graben.
Out of the 6.5 billion barrels, the country expects to recover about 1.4 billion barrels, at a peak production rate of about 230,000 barrels per day and the amount of money that has been invested in exploration and appraisal so far, is approximately $ 3.8 billion.
Peninah Aheebwa, the director, technical support services at Petroleum Authority of Uganda (PAU),explained that at 6.5 billion barrels of oil Uganda can still profitably sell the oil at a lesser cost per barrel.
“This is one of the highest global success rates, given that on average, only 25% of wells the world over yield oil at the exploration phase. As Uganda moves into putting in place the required infrastructure for production, we expect much more investment, in the range of $ 15-20 billion,” said Aheebwa.
She stated that the highly anticipated conclusion of the key oil agreements and the launch of Uganda’s oil and gas projects is a significant milestone for the sector and this milestone gives way to the processes of approval and award of contracts to the main engineering, procurement and construction contractors, in order for the construction work to commence.
According to Aheebwa, three main factors impact the profitability of an oil project. These are: costs to develop and operate the oil project (capital and operational); the production volumes over the project life (amount of oil to be produced) and the oil price (the price achieved following the sale of the crude oil on the international market).
“For Uganda’s case, whereas it is true that the international oil price environment has changed in recent years, Uganda has benefited from the significantly low cost of developing the projects. This has improved the profitability of Uganda’s oil projects, and hence improved the expected government revenue,”she noted.
PAU monitors costs to ensure value-for-money in the projects and the fiscal regime for the upstream projects, the Production Sharing Agreement (PSA), boosts the profitability of the projects, and guarantees revenue to the economy.
The PSA requires that Uganda keeps track of the costs because all the costs that are incurred will be recovered by the oil and gas companies, when the oil production starts.
To maximise value for Uganda, the PAU ensures that only what needs to be spent is what is being spent, because the less the country spends, the more it will have to share when production starts.