Uganda discovered oil deposits worth 2.5 billion barrels in the Albertine Rift Basin in 2006 and since then country has discovered more oil deposits with the updated estimates of oil reserves now standing at about 3.5 billion barrels. It is important to that the reserves are only from 40% of the Albertine Graben area under oil exploration and this same area still has great potential for more discoveries.
Uganda has 12 billion standard cubic feet (339 million cubic meters) of natural gas reserves in its Albertine Graben region. The gas is in addition to oil reserves of more than 3.5 billion barrels of crude oil.
Impact of Oil on the Environment and other sectors
Over 50% of birds, 39% of mammals, 19% of amphibians, and 14% of reptiles and plants found in mainland Africa have their home in the Rift Valley. The process of oil exploration in this area if not done under proper control could causes harm to the wildlife. The exploration process displace our wildlife heritage.
Uganda as a country stands to improve its economy using oil and gas revenue although, the country’s tourism and environment sectors could pay an expensive price.
Planned utilization of oil and gas revenue
The oil and gas revenues will certainly dramatically increase the government revenue for investing in building the country’s infrastructure, agricultural transformation, and human capital development. The investment is very necessary for the development of Uganda. However Uganda faces the challenges of enhancing the capacity of Uganda to plan to effectively absorb expected oil and gas revenues and to properly account for the application of the oil and gas revenue given the capacity of the human resources.
Slow oil development efforts
Uganda’s oil development efforts have stagnated over the period as a result of the following issues:
1. Government’s slow process in issuing licenses to the sector.
2. Lack of capacity on the side of government
3. Lack of effective legal framework
4. Infrastructural setbacks
5. Transparency challenges
The Exploration, Development and Production Bill 2012 and the Refining, Gas Conversion, Transportation and Storage Bill 2012 were presented to Parliament but have not been passed into law as of today. Promotion and regulation of the oil and gas sector has been initially undertaken by the Ministry of Energy and Mineral Development through the Petroleum Exploration and Production Department, (PEPD). Under the National Oil and Gas Policy, the Ministry handles the policy aspects, while regulatory and commercial aspects will be handled by Petroleum Authority of Uganda (PAU) and Uganda National Oil Company (NATOIL).
Companies issued with drilling licenses
Companies that have issued with drilling licenses include; Heritage oil and gas limited of United Kingdom and Tullow oil Energy Africa of South Africa. These companies have drilled 77 oil wells to-date with 70 encountering oil and gas..
Total E&P and CNOOC
Tullow Oil has been successful in the exploration aspect and has already sold part of its interests to Total E&P and CNOOC each taking up 33.3%.
Tullow, Total E&P and CNOOC are expected to build their own infrastructure that will route the crude oil to one central point where the refinery and other buyers will collect it from. The three parties will be paid on basis of crude oil which will be taken out of the central collection centre by the refinery and other buyers.
Regional oil demand
Uganda’s consumption of processed crude oil is estimated to be 20,000 barrels per day and regional consumption including Kenya, Tanzania, Rwanda and Burundi is estimated at 60,000 barrels per day.
Strategies of how the balance of the processed crude oil will be disposed off are being developed since Uganda’s refinery facility is planned at the capacity of 120,000 barrels per day
By 2013 Uganda oil demand is projected to grow to 82,000 barrels per day.
The capacity of Refinery
The construction of an oil refinery is planned at Kibaale in Buseruka Sub-County in Hoima District with the capacity to process 120,000 barrels per day. It is also proposed to develop the refinery in phases until the maximum capacity 120,000 barrels per day are attained. Over 29 square kilometers (about 29,000 hectares) worth of land have been earmarked for the refinery and people residing in the area have already been advised to leave the land
The proposed refinery facility is estimated to cost between USD 2bn –US$4bn .The government plans to take over a 40 % stake in the project and with the private investors contributing the remaining of 60%.
Trade in Oil
The global practice is for oil producing countries to export crude oil to the consumers so that the processing of crude oil can be done near the area of consumption. This is mainly so because it o easier and safer to transport crude oil as opposed to processed oil products,
Uganda’s plan to process crude oil next to the drilling because of the expected benefits to the country.
Oil and Gas sector has been summarised to include the following