{UAH} COVID-19 SHOULD NOT DELAY FINAL INVESTMENT DECISION

African dossier business analyst

Uganda's oil and gas sector potential remains high since major discoveries of oil decades ago in the Lake Albert graben by Tullow Oil. A lot of efforts have continued to explore these potentialities. Lately, Total announced it had signed a deal with Tullow Oil to acquire its long-standing stakes in the Uganda Lake Albert project for $575 million. Tallow's exit means the joint venture partners are now Total and China National Offshore Oil Corporation (CNOOC).

This deal settles more dust that had scared the Ugandan oil and gas sector, upon first discoveries in 2006 and creates a vote of confidence of what lies ahead.

This milestone takes Uganda closer to a long-awaited final investment decision on the Lake Albert Project (Tilenga project) which is associated with the $3.5-billion East African Crude Oil Pipeline project. The Tilenga project comprises oil exploration, a crude oil processing plant, underground pipelines, and infrastructure in the Buliisa and Nwoya districts of Uganda.

In the midst of COVID-19, Total's announcement surprised many as most operators are currently looking to save costs rather than invest in new projects. However, the project execution and associated timelines may be at risk of delays due to the potential difficulty to mobilize people and put together a strong workforce, depending on how long COVID-19 lasts and how we can contain it.

A key aspect of Uganda's nascent oil and gas industry is the East African Crude Oil Pipeline from Hoima in Uganda to the port of Tanga in Tanzania. Stakeholders are hoping the Total transaction will accelerate development. Front end engineering and design works have been finalized as well as environmental and social impact assessments, both in Tanzania and in Uganda. The pipeline route has been traced and the land acquisition process is well understood.

The planned Hoima refinery is expected to produce 30,000 barrels per day on commissioning to reach a maximum production of 60,000 barrels per day in subsequent phases. "Total's announcement has boosted confidence of investors involved in the refinery project, as they can now foresee first oil" remarked Dr Elly Karuhanga.

Despite progress, concerns remain regarding sector recovery in the midst of the COVID-19 crisis. On the question of exploration contract renegotiation, Governments must take a prudent approach to renegotiating product and sharing agreements as they are the basis to operators' strategy right from the start. Although we are currently in a COVID-19 situation, a production and sharing contract is a 25-year-long agreement so we can't go ahead and change the terms on a punctual situation.

Uganda currently has an ongoing licensing round which was launched in September 2019 and will close in September 2020. The round includes five blocks for a total acreage reaching 5,000 square kilometres.

The World Bank expects Uganda to grow at a rate of over 10 percent per annum from oil production and related activity, sending a message to investors that there are immense opportunities for comparatively high returns in Uganda's oil and gas sector, despite the current challenges of the COVID-19 pandemic.

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"War is nothing but a  continuation of political intercourse, with a mixture of other means. Man will never be free until the last king is strangled with the entrails of the last priest." 

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