UGANDA SIGNS THREE KEY OIL AGREEMENTS UNLOCKING COUNTRY’S PRODUCTION, EXPORT POTENTIAL
By CJ Etyang
The government on Sunday April, 11, 2021 made a historic milestone in its journey to production and exportation of oil and gas. This was at event which culminated into the conclusion of vital agreements, graced by President Yoweri Kaguta Museveni and President Samia Suluhu Hassan of the United Republic of Tanzania.
One of the key agreements signed was the Uganda Host Government Agreement (HGA) which was signed between the Government of Uganda and the EACOP Company. Martin Tiffen, the General Manager at EACOP Company signed the Uganda HGA on behalf of the firm. The HGA concluded the legal framework and contractual obligations between Uganda as the host country, and EACOP Company as the project company.
The second agreement was the Shareholders Agreement (SHA) which defines the rights and responsibilities of the shareholders in the EACOP Company. The shareholders are: the Uganda National Oil Company (UNOC) with 15%, the Joint Venture Partners (Total E&P Uganda Limited with 62% and CNOOC Uganda Limited with 8%) and the Tanzania Petroleum Development Corporation (TPDC) TPDC which will take shareholding of up to 15%. The SHA is significant because it has constituted the EACOP Company, and will now guide the funding of shareholding, finance structure and general governance of the company. The third agreement that was signed is the Tariff and Transportation Agreement (TTA).
The TTA defines the rights and responsibilities of the shippers on one hand, and the transporter on the other hand. It was signed between the transporter, EACOP Company and the Shippers of the crude oil who are the Government of Uganda, UNOC, Total E&P Uganda Limited and CNOOC Uganda Limited.
Rt. Hon. Speaker, The launch of the projects on Sunday paved way for EACOP Co. to award the main Engineering, Procurement and Construction (EPC) contracts. The award of these contracts is important because it opens up substantial opportunities for Ugandans and Ugandan companies to provide goods and services for the construction of the EACOP.
The conclusion of these key agreements for the EACOP, Rt. Hon. Speaker, is a major requirement for the announcement of the Final Investment Decision (FlD). lt is important to appreciate that there is no document that will be signed for, or called, “FlD”; the project launch on Sunday, 11th April, 2021 at State House, Entebbe, is a demonstration of the commitment the respective Governments and oil companies have for the projects. With these agreements in place, the oil companies and Government can proceed with the approval and award of contracts to the main Engineering, Procurement and Construction (EPC) contractors. This will enable the construction work for the projects to proceed.
Government and the Companies estimate that First Oil will be within four (4) years, with the actual construction starting next year. However, other processes are already on-going including the acquisition of land for the pipeline and the EPC management activities. lt is important for the people of Uganda to take note of, and position themselves to benefit from, the extensive activities already going on.
The Ministry of Energy and Minera! Development developed the Loca! Content Policy in 2018 to streamline the implementation of the national content regulations within the Petroleum Laws. There are also ongoing opportunities by the Government and the JVPs for skills development, specialised training and enterprise development, all aimed at building the capacity of Ugandans and Ugandan companies to competitively work in, or supply goods and services to the sector.
The Minister for Energy and Mineral Development Mary Kitutu Kimono told Parliament on Wednesday that the signing of the agreements is a requirement for all companies that would like to supply goods and services in Uganda’s oil and gas industry to register on the National Supplier Database (NSD) through the Petroleum Authority of Uganda website.
Similarly, the minister said Ugandans who would like to work in the sector are encouraged to get onto the National Oil and Gas Talent Register (NOGTR), for easy access and visibility of the jobs in the sector.
“The signing of the agreements and the launch of the oil and gas projects, more so during the on-going Covid-19 pandemic, are an assurance of commitment from our investments Partners towards the sustainable development of Uganda’s petroleum resources,” theCabbinet Minister said.
“Uganda’s oil and gas project is the only major project in Sub-Saharan Africa to be sanctioned since the pandemic started, which attests to the profitability of the projects, and the country as a favourable investment destination.”
She said the significant investment into Uganda’s economy that has now been unlocked includes the implementation of the Tilenga Project in Buliisa and Nwoya districts (approximately US$4 billion); the Kingfisher Project in Hoima and Kikuube Districts (approximately US$1.5 billion); and, the East African Crude Oil Pipeline (EACOP) that will cross the ten (10) districts of Hoima, Kikuube, Kakumiro, Kyankwanzi, Gomba, JVlubende, Lwengo, Sembabule, Kyotera and Rakai in Uganda (approx. US$3.6bn). This, she said, is in addition to what Government is already investing in the required support infrastructure, including Hoima lnternational Airport (over US$500m) and 700 kilometres of oil roads (approx. US$900m).
She said some of the specific benefits that will accrue to Uganda and Ugandans from the launch of the projects include de-risking all the other upcoming projects including the refinery and the new exploration projects the development of the Upstream projects guarantees the supply of feedstock into the refinery, while the pipeline and the refinery provide evacuation options for future oil discoveries in the new exploration areas;
Another benefit the minister said is the employment of Ugandans which will be through direct employment of about 14,000 people by the companies, indirect employment of about 45,000 people by the contractors, and induced employment of about 105,000 people as a result of utilisation of other services by the oil and gas sector. Of the direct employment, the minister told Parliament, 57% are expected to be Ugandans, which is projected to result in an estimated USD 48.5 million annual payment to Ugandan employees;
Through the oil and gas investments, she said there will be greater participation of Ugandan enterprises in the provision of goods and services where at least 28% of the USD15 billion (equivalent to USD4.2 billion) investment during the development and construction will go to Ugandan Companies through provision of various goods, services and works;
Kimono also said there will be capacity building and technology transfer through subcontracting and joint venturing with the involvement of world-class oil service companies and the expected Joint Venture and sub-contracting opportunities. Ugandan companies, she said, are expected to greatly benefit from the expected partnerships.
“As witnessed during the exploration phase, we expect Ugandan companies to progressively gain capabilities to provide technical services that have hitherto been a preserve of the more experienced foreign companies,” the minister said.
Additionally, she said the GDP of the country is expected to reach USD 40.1 Billion in 2020/2021. “This will significantly be boosted through sectoral linkages by close to USD 1 Billion by the end of the construction phase,” she said. (For comments on this story, call, text or whatsapp us on 0705579994, 0779411734, 0200900416 or email us at firstname.lastname@example.org).