Anxiety over when first oil will be produced in Uganda has persisted among government, international oil companies, and Ugandans since 2006 when oil was first discovered in commercial quantities in the country. Current forecasts put the date at three to four year from now.
The Ugandan government has taken steps toward first oil after it issued on Sept. 25, 2013, the first production license to China National Offshore Oil Corp. (CNOOC) to develop Well 1A in the Kingfisher field in Hoima District. The license was approved following a satisfactory review of CNOOC’s field development plan, said Peter Lokeris, Uganda’s minister of state for energy and mineral development.
Production for the approximately US $2 billion development is expected to start in 2017, Lokeris said in a Global Times report. The well, located in the Lake Albert Rift basin in northwest Uganda, is estimated to have more than 635 MMbbl of oil, of which 196 MMbbl are recoverable. Initially, 30,000 b/d to 40,000 b/d will be produced, but the rate is expected to increase after further development.
“Oil seeps have been identified on the shores of Lake Albert for many years, and the first exploration well was drilled there in 1938, encountering oil shows and clearly demonstrating that oil was sourcing in the basin,” Tullow Oil said on its website. “However, it took over 60 years before any further activity took place.”
The Kingfisher area is jointly owned by CNOCC, Total, and Tullow Oil, which said that it drilled the first well (the Mputa-1) since 1938 with its partners in early 2006.
The Mputa-1 well, Tullow Oil added, was a “discovery encountering good quality reservoir and 33°API oil. This was followed by the Wagara-1 well, a discovery that was flow tested at a combined rate of over 12,000 b/d, and the Nzizi well oil and gas discovery that was also successfully flow tested. Combined, these results demonstrated that the Lake Albert Rift basin was a working hydrocarbon system.”
More than 50 wells have been drilled in the basin from Kingfisher-1 to Bufffalo-1, 150 km (93 miles) to the north,
Tullow Oil said, adding that 47 of the wells encountered hydrocarbons, proving the area to be highly prospective.
The Ugandan government and the consortium (Total, Tullow, and CNOOC) still have to decide on daily production levels and the export pipeline route. The government prefers a gradual ramp-up and lower peak output to slow the depletion of reserves, while the consortium favors production ramping up quickly and peaking at 200,000 b/d or more by 2020, the US Energy Information Administration (EIA) said, citing reports from the Eurasia Group and IHS Global Insight.
Oil experts see the award of the first production license as an important milestone in the progress of Uganda’s nascent oil and gas sector. The step could help facilitate an oil boom capable of transforming what the World Bank calls one of the world’s poorest nations.
“The award of the license is about the most important development in the oil and gas sector of Uganda,” said an oil and gas expert in Lagos. “Oil companies operating there and the people who have urged the government to fast-track oil production would be pleased that first oil can be seen in the country by 2017.”
The government is confident that oil will finally flow by 2017 in Uganda now that CNOOC has received a production license, Ernest Rubondo, commissioner for the Uganda Petroleum Exploration and Production Department (PEPD), said in a report by allAfrica on Sept. 26, 2013.
The Ugandan government and the energy ministry must, however, put in place the two key institutions – the regulatory Petroleum Authority of Uganda and the National Oil Co. (NATOIL) – to regulate the country’s oil industry following the passage of the Petroleum (Exploration, Development and Production) Law 2012 by parliament in December 2012. The law, which establishes the framework and institutions to regulate upstream petroleum activities, became the Petroleum (Exploration, Development and Production) Act 2013 after it was signed by President Yoweri Museveni in March 2013.
Without the two institutions in place, for example, there won’t be any legal institution, apart from the Petroleum Authority of Uganda, to advise the Ugandan oil minister in the negotiation of petroleum agreements and the granting and revocation of licenses, and to monitor conditions of operators and their trade practices to ensure that competition and fair practice is maintained as required by the act.
The Petroleum Authority of Uganda will have a key role in the license award process if the country is to abide with the new Petroleum (Exploration, Development and Production) Act of 2013. NATOIL will manage the commercial aspect of the Uganda’s petroleum activities and perform other vital functions in the country’s oil industry.
Field development plans and petroleum reserve reports for six other fields are currently under review, Rubondo said, pointing out that six more licenses for the fields would be issued to oil companies soon. The six oil fields are Waraga 1 and 2, Mputa, Kasamene, Kigogole, and Wairindi in Hoima district.
Uganda has estimated oil reserves of 3.5 Bbbl, but oil companies say figure could go higher as more exploration work continues.
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