Done Deal! Oil Production To Kick Off As Uganda, Tanzania Sign Final Investment Decision Agreements

Done Deal! Oil Production To Kick Off As Uganda, Tanzania Sign Final Investment Decision Agreements

By Uganda Online Media

Kampala: Chinese oil company, CNOOC Uganda Limited has said it is ready for oil production after signing the  Final Investment Decision for the Kingfisher Project.

The FID was signed today following the accomplishment of the Host Government Agreements (HGA) agreement signed between the Government of Uganda and Tanzania for the EACOP project in 2021, the ESIA certificate award for the Kingfisher Project in 2020, and the passing of East African Crude Oil Pipeline (EACOP, Special Provisions) Bill into Act of Parliament in 2021, which all paved way for commercialization of the oil and gas resource in a sustainable manner.

TotalEnergies SE and its partners reached a final investment decision worth over $10 billion to produce Uganda’s oil discoveries and build a pipeline that will turn the landlocked East African nation into a significant crude exporter.

The French major, along with Cnooc Ltd. and state-owned Uganda National Oil Company, announced the agreement that will bring the output from the Tilenga and Kingfisher fields near Lake Albert and transport them through the planned East African Crude Oil Pipeline.

“Before this day, it was long negotiations. Now it’s a time of execution and time is money so we must not lose a single day,” TotalEnergies Chief Executive Officer Patrick Pouyanne told an audience of officials in the Ugandan capital, Kampala.

The key step comes amid growing concern that new oil and gas developments run counter to a transition away from fossil fuels, and conservationists have put pressure on potential financing sources. The government and companies still plan to move ahead with production expected in 2025. Output is projected to peak at 230,000 barrels a day, which would make the new producer bigger than some African OPEC members.

Uganda considered the prospect of developing the fields in 2006 when the first commercial discoveries were made by Tullow Oil Plc. The London-based explorer had hoped to begin exports as early as 2015, but ultimately sold its stake in the fields. Delays have plagued the development, ranging from changing the path of the pipeline to reaching an agreement with the government overtax.

That changed when a range of agreements related to the projects were completed last year. The international companies will develop the fields and a $4.2 billion, heated, 897-mile (1,444-kilometer) pipeline to transport the waxy crude to the port of Tanga in Tanzania in the next four years. Total owns a 62% stake in that development. UNOC and Tanzania Petroleum Development Corp. each have 15%, and Cnooc holds the remainder.

Getting Buyers

President Yoweri Museveni, in remarks at the ceremony, said a global movement pushing for more clean energy would not be an issue for the project. “We have studied this, there is no possibility of petroleum not getting buyers,” he said.

His government and TotalEnergies have agreed on the development of 1 gigawatt of renewable energy by 2030, Pauline Irene Batebe, the permanent secretary in the ministry of energy, said at the ceremony.

At a cost of $10 a barrel of oil equivalent to develop the project, it meets TotalEnergies’s criteria and will generate almost a third of the company’s regional free cash flow, according to Juma Mlawa, a senior analyst at consultancy group Woodmac. Though the government will reap the biggest benefit from the investment, bringing in an estimated $2 billion a year in taxes and royalties at its peak, he said.

The energy sector could see as much as $15 billion of projects in the next four years, according to Peter Muliisa, UNOC spokesman. “This is a huge investment for this country.”

Uganda has plans to build a 60,000 barrels-per-day refinery led by General Electric Co. to meet regional demand for products that are currently imported.

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