According to the African Energy Chamber’s (AEC) (www.EnergyChamber.org) Q1 2022 Outlook, The State of African Energy, as the region sees relatively increased sanctioning activity, 2022-2025 cumulative capital expenditure from Africa has seen an increase of $23 billion. In this context, new projects and greenfield investments in emerging oil and gas producing countries such as Uganda will increase capital spending in Africa in 2022 and beyond as the continent seeks to ensure a secure gas and oil supply to meet local demand and expand exports.
Greenfield investments in Uganda will play an increasing role in expanding Africa’s oil and gas exploration and production as the east African country seeks to expand its nascent market for economic transformation and energy reliability locally, regionally and at continental level. Uganda has approximately 6.5 billion barrels of oil reserves – of which 1.4 billion barrels are economically recoverable – and 500 billion standard cubic feet of estimated gas reserves. The government seeks to leverage these resources to ensure reliable oil and gas supply to meet local demand and across Africa as production in legacy projects in leading producers including Nigeria, Libya and Angola decline through to 2025.
A lack of investment in production and infrastructure development since the early 2000s has resulted in a stagnant oil and gas market in Uganda. However, policy reforms and various initiatives adopted by the Ugandan government in recent years have attracted significant investment and encouraged the entrance of international majors in oil exploration as well as the development of infrastructure that can enable the east African country to start production by 2025.
“The timing for Uganda to optimise investment and exploration and to kickstart its production engines is now. Price uncertainty across the globe and energy poverty in Africa provide a perfect storm for Uganda to enhance its oil and gas market and to emerge as both a regional and global energy supplier,” stated NJ Ayuk, Executive Chairman of the AEC.
The country’s oil and gas reserves have the potential to produce 230,000 barrels per day (bpd) for a period of 15 years. Though relatively lower compared with leading producers such as Nigeria and Angola, the country’s oil and gas production capacity will have a significant impact in stabilizing supply across the continent, and in particular, east Africa.
Notable projects in Uganda include the Lake Albert Development Project, comprising both the Tilenga and Kingfisher projects, operated by French oil major TotalEnergies and the China National Offshore Oil Corporation (CNOOC), respectively. In February 2022, the Ugandan government announced FID for the Lake Albert Development, ushering in a new era of development and market growth in Uganda. With total production estimated at 230,000 bpd for the Tilenga and Kingfisher projects, development is on track to start producing by 2025.
Meanwhile, also forming part of the Lake Albert Development, in May 2021, TotalEnergies, CNOOC, the government of Tanzania and the Uganda National Oil Company signed a deal for the construction of the $3.5 billion, 1,410km East African Crude Oil Pipeline. Once operational, the project will enable Uganda to export its energy resources to meet regional and international demand, enabling the transportation of 216,000 bpd.
“The FID announcement in February 2022 marked a significant moment in Uganda’s energy sector development. In the current global context, establishing viable export networks between emerging producers such as Uganda and international markets will be critical to stabilize markets and meet global demand. Now, Uganda needs to prioritise increasing exploration activities to expand its portfolio of oil and gas discoveries,’ added NJ Ayuk.
Despite efforts to explore and appraise oil and gas discoveries in Uganda, the slow pace in developing infrastructure that enables production to start has been slow in Uganda. In spite of the vast oil and gas reserves, the country today has high rates of energy poverty. Up to 66% of the Ugandan population are energy poor, whilst 33% are living with extreme poverty, highlighting the need for the government to accelerate growth plans for its oil and gas sector. Additionally, despite its reserves, the country relies on petroleum imports to sustain its economy. Recent developments in the sector, therefore, coupled with demonstrated political commitment will be instrumental for the country as it moves to make energy poverty history and position itself as a global oil and gas contender.
In this regard, the AEC’s annual conference, African Energy Week (AEW) 2022 – taking place from October 18-21, 2022 in Cape Town – will discuss measures the Ugandan government can implement to fast-track the development of its oil and gas industry. AEW 2022 will host panel discussions and investor summits that will focus on how emerging hydrocarbon producers in Africa including Uganda can attract investment that can help them boost market growth.
Distributed by APO Group on behalf of African Energy Chamber.
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