Main Projects Propelling Uganda in Eastern Africa

Since 2018 Uganda has been protagonist to a series of upstream, midstream and downstream projects that have led it to become a prospective oil nation in Eastern Africa. The following article will touch base on the country’s Tilenga and Kingfisher projects and the subsequent East African Crude Oil Pipeline (EACOP), as well as the Albertine Graben Refinery Consortium (AGRC), and the Kabaale (Hoima) Industrial Park.

Background

As of August 2022, approximately 1.4 billion of Uganda’s 6.5 billion barrels of proven oil reserves, located mostly on its western border with the DRC, are estimated to be economically recoverable. TotalEnergies, and the China National Offshore Oil Corporation (CNOOC), hold licenses to develop these resources.

In February 2022, TotalEnergies EP Uganda, CNOOC Uganda Limited, the Uganda National Oil Company (UNOC), and the Tanzania Petroleum Development Corporation (TPDC) announced that they had reached the Final Investment Decision (FID) for the upstream oil production projects (Tilenga) and the East African Crude Oil Pipeline (EACOP).

The Ugandan government expects developing the oil sector will require several billion dollars of infrastructure investment to build and support a refinery, 2 central processing facilities, and the 1,445 kilometre EACOP, the world’s longest heated pipeline.

In 2018, the Albertine Graben Refinery Consortium (AGRC), a U.S.-led group of companies including General Electric, YAATRA Africa, and Saipem, won the right to finance, build, and operate a planned USD $4 billion oil refinery. The FID for the refinery is projected for mid-2023.

In June 2021, TotalEnergies announced it had made a conditional award of USD $2 billion to a consortium led by McDermott International and Sinopec for engineering, procurement, construction, and commissioning (EPCC) for the development of 31 well beds and a central processing facility of the Tilenga onshore oil field that will generate around 200,000 barrels per day.

As for opportunities in the Eastern African nation, International Oil Companies (IOCs) are increasingly looking for service subcontractors including engineers, housing construction, road infrastructure design and construction, environmental hazard controls, and vocational training services.

The USD ​​$10 billion Uganda-Tanzania Tilenga oil project

Known for many years as an area where natural oil seepages occurred, oil was first discovered by drilling in the Lake Albert area of Uganda in 2006. This first discovery led to an extensive period of further exploration and appraisal which was completed in 2014.

As stated by TotalEnergies, the Lake Albert region in Uganda has major oil and gas resources, estimated at over 1 billion barrels. Production will be delivered to the Tanzanian port of Tanga by a cross-border pipeline, built and operated by the East African Crude Oil Pipeline company (EACOP). First oil is due in 2025.

Located in the Buliisa and Nwoya districts in Lake Albert, the USD $10 billion investment Tilenga project is operated by TotalEnergies, in partnership with CNOOC and UNOC. It includes the development of 6 fields and the drilling of around 400 wells from 31 locations. Production will be delivered through buried pipelines to a treatment plant built in Kasenyi, for the separation and treatment of the fluids (oil, water, and gas). All of the water produced will be reinjected into the fields and the gas will be used to produce the energy needed for the treatment process.

Surplus electricity will be exported to the pipeline and the Ugandan grid. One of the fields developed is located inside Murchison Falls Park, while the others are located outside the Park, south of the Victoria Nile in sparsely populated rural areas and activities that are essentially agricultural.

The Kingfisher Development Project

The Kingfisher Development Area (KFDA) covers the Kingfisher field located in Kikuube District with plans for future tie-in of Mputa-Nzizi-Waraga fields in Kaiso-Tonya, Hoima District. The project is operated by CNOOC Uganda Limited and includes the following facilities: (i) Development of a Central Processing Facility (CPF) with a capacity of 40,000 barrels of oil per day; (ii) 31 wells (11 injectors and 20 producers) to be drilled on 4 well pads; (iii) 19 kilometres of flow-lines to connect the fields to the CPF; (iv) a 46 kilometer, 12 inch feeder pipeline from the CPF in Buhuka to the export hub and Refinery in Kabaale, Hoima District; (v) a Lake Water Abstraction station; and (vi) supporting infrastructure such as temporary and permanent camps, a materials yard, a jetty and several access roads, among others.

The East African Crude Oil Pipeline (EACOP) and upstream projects

EACOP is being constructed in parallel with the 2 aforementioned upstream development projects which are not part of EACOP development and investment.

Each development will consist of a Central Processing Facility (CPF) to separate and treat the oil, water and gas produced by the wells. As previously mentioned, Kingfisher will have 4 well pads and a CPF with a peak daily capacity of 42,000 barrels per day. Tilenga has 31 wellpads and a 204,000 barrels per day CPF. Tilenga and Kingfisher CPFs will be connected by feeder lines to the starting point of EACOP at Kabaale; here the oil will be metered and then commingled into a single stream.

The Ugandan Refinery project has a right of first call to 60,000 barrels per day, with the remainder of the oil being exported via EACOP. The pipeline route via Tanzania was confirmed in April 2016 at a summit with the East African Heads of State. In the period 2016-2018 the EACOP route was studied and narrowed down to its final width of 30 metres, allowing to then initiate land surveys and the Environmental and Social Impact Assessments (ESIAS).

This EACOP will be designed, constructed, financed and operated through a dedicated Pipeline Company with the same name. The shareholders in EACOP are affiliates of the three upstream joint venture partners (TotalEnergies E&P Uganda, CNOOC Uganda, and the UNOC) together with the Tanzania Petroleum Development Corporation. Shareholdings are TotalEnergies 62%, UNOC and TPDC 15% each, and CNOOC 8%.

Moreover, the EACOP project consists of the construction of a buried 1,443 km oil pipeline between the town of Kabaale in Uganda and the port of Tanga in Tanzania, and a storage terminal and loading jetty in Tanga.

The oil pipeline includes 6 pumping stations, powered by solar plants in Tanzania, and a heat tracing system. The physical characteristics of the oil from Tilenga mean that it needs to be kept at a temperature of 50°C for transportation. The route of the pipeline was designed to avoid areas of environmental interest as much as possible, and generally crosses farming areas.

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Social and environmental context at Tilenga-EACOP

The Tilenga and EACOP projects are situated in a sensitive social and environmental context and require land acquisition programs with close attention to the rights of the affected communities. According to TotalEnergies, “environmental and social impact assessments (ESIAs) have been carried out in compliance with the exacting standards of the International Finance Corporation (IFC). Third-party reviews have also been conducted to ensure that the projects are compliant with the best social and environmental practices”.

The completion of the Tilenga and EACOP projects will require the implementation of a land acquisition program covering some 6,400 hectares. For Tilenga and EACOP, this program means relocating 764 primary residences, and will affect a total of 18,800 stakeholders, landowners and land users. Carried out in compliance with IFC performance standards, this program will begin with a complete survey of the land and crops and monetary compensation and/or compensation in kind. Each family whose primary residence is being relocated may choose between a new home, and monetary compensation. An accessible, transparent and fair complaints-handling system will be running throughout the process.

Furthermore, right from the design phase of these projects, special attention has been paid to information, consultation and consensus-building with all stakeholders; over 70,000 people were consulted for the ESIAs. Discussions have been initiated with several Non-governmental Organizations (NGOs), laying the foundation for a sustainable collaboration process aimed at capitalizing on their expertise and driving continuous improvement.

Moreover, TotalEnergies has decided to restrict the footprint of the Tilenga project in Uganda’s Murchison Falls Park, a protected area and a showcase for African biodiversity. Development will be limited to an area that accounts for less than 1% of park land, and thanks to strict preventive and reduction measures built into the design of the project, the temporary and permanent Tilenga facilities inside the Park will cover less than 0.05% of the surface area.

Refining oil in Uganda and the Albertine Graben Refinery Consortium (AGRC)

Regarding the development of a refinery in Uganda, the East African Community (EAC) Refineries Strategy of 2008 recommended, among other things, the development of a second refinery in East Africa to be developed in Uganda. The other refinery being that of Mombasa which has since been shut down.

Government subsequently contracted Foster Wheeler Energy Limited from the United Kingdom during 2009 to carry out a feasibility study on the development of a refinery in Uganda. This study was undertaken during 2010-2011 and it defined the key aspects of developing a refinery in the country such as the size and configuration of the refinery, its location and financing as well as the market for the petroleum products to be produced from the refinery. The study also confirmed the economic viability of refining petroleum in the country and its recommendations were adopted by the government during 2011.

The Ugandan government conducted a competitive bidding process to identify a lead investor for the refinery project, which was terminated in June 2016. The refinery development project was restructured and expressions of interest were received from about 40 firms, of which 7 were shortlisted for detailed discussions.

Due diligence was undertaken on 4 consortia, and 2 consortia progressed to negotiations on the Project Framework Agreement. The Albertine Graben Refinery Consortium (AGRC) emerged as the selected lead investor.

The USD $4 billion project includes the development of a 60,000 barrels of oil per day refinery in Kabaale, Hoima District and a 211 kilometer multi-products pipeline from Kabaale to a distribution hub in Namwambula, Mpigi District; the Project Framework Agreement (PFA) for the project was signed in April 2018. After several engagements, AGRC’s USD $17 million Pre-FID Performance Bond was issued and confirmed by the government of Uganda in September 2018. The PFA thus became effective, and the Pre-FID activities such as the FEED, ESIA and Geo-technical studies for the refinery development commenced that same month.

The Uganda Refinery Holding Company Limited (URHC), a subsidiary of UNOC, will hold Uganda’s commercial interests on behalf of the government of Uganda, participating with up to 40% shares in the refinery Project.

The Kabaale (Hoima) Industrial Park

Also, the development of a Master plan for the development of an industrial park which will have an international airport, refinery, crude oil and products storage, transmission hub, logistics warehousing, offices, petrochemical industries and associated facilities, among others, was completed in 2018. The Master Plan will provide for development of utilities, infrastructure and common services. The industrial park will be located in Kabaale, Hoima district.

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