Kampala. Energy minister Irene Muloni, disclosed Tuesday, that government has given the three oil joint venture (JV) partners, France’s Total E&P, UK’s Tullow Oil and China’c Cnooc, up to December 31 as deadline for closing Final Investment Decision (FID) on proposed investments in the next development and production phases leading to Uganda’s first oil.
Ms Muloni also reiterated that government remains on first commercial oil starting flowing four years from now - a date which is somewhat impractical given the amount of work that remains undone.
With financial aid taps lately getting drier the government wants oil revenues more than ever before and on which they are borrowing heavily as a guarantee.
“As government we are very anxious and committed to this,” she said, while presiding over contract signing for the Front End Engineering Design (FEED) study between the JV partners and a consortium of French and US firms.
The Shs8b ($2.5m) FEED contract was awarded to Flour (France) working with China Petroleum Engineering and Construction Corporation (CPECC), Technip (France), and Chicago Bridge & Iron Company (US).
FEED is the last preparatory stage that will detail technical requirements, among others, layout of the 36 well pads, technology required for drilling the 400 wells, and estimated costs of required infrastructure to start production on (EA1) at the northern end of Lake Albert (in the Murchison Falls National Park) operated by Total in Nwoya District and Exploration Area 2 (EA2) to the east of Lake Albert in Buliisa District previously operated by Tullow but sold majority stake to the former early this year.
Total’s general manager Adewale Fayemi, said the FEED will also entail engineering designs for the proposed 200,000 barrels Central Processing Facility (CPF) in Hoima.
This will also include design studies for feeder pipelines that will evacuate crude oil from Exploration Area 3 (3A)-Kingfisher in Kaiso-Tonya and nearby oil wells to the planned CPF in Hoima District.
A CPF is where oil will be stored first for stabilisation and treatment before being fed into either the proposed refinery or crude oil export pipeline to Tanzania.
The CPF in Hoima is also expected to generate 35 megawatts of electricity that will run field operations from natural gas from fields.
Another CPF will be constructed in Buliisa for oil fields in the area and in Nwoya (operated by Total) and is expected to generate 70 megawatts from gas reserves.
Mr Fayemi, speaking on behalf the JV partners, described the FEED contractors as having “invaluable experience” and expressed optimism that they will fast track the work at hand within schedule. The FEED study will run concurrently with the environmental impact and social assessment (ESIAs) and land acquisition and resettlement planning, for all the projects planned.
The FEED for EIA 1 and EIA 2 follows the awarding eight production licences to Total and Tullow last year in August last year. Once FEED is completed, will give a clear picture of how much the JV partners need to invest (FID) - although earlier projections showed the oil firms would invest up to $8b (about Shs27 trillion) - and propel to the last phase Engineering, Procurement and Construction (EPC) leading to production.
Although government says the JV partners have up to December to close FID, usually this takes more than a year after FEED. EPC takes between two to three years.
The FEED will draw several engineers, especially expatriates but executives of the contracted firms said they will prioritise local content by tapping into available expertise.
Current plans are to fast-track works on the Kingfisher field, whose production licence was granted earlier in 2013.
Its licence had been initially, conditionally awarded to Tullow in February 2012 but after which the Anglo-Irish explorer sold (farmed down) 66.66 per cent of its stake to both Cnooc and Total.
After the farm down under a JV arrangement in the same month Cnooc was tapped to take over Kingfisher.
Oil reserves at the field are estimated around 800 million barrels but production in advanced stages will be running at 20,000 barrels per day (bpd).
Cnooc, since 2013, then embarked on rethinking most of its earlier conceptual designs for the field, undertaking surveys for feeder pipelines to evacuate crude to the CPF, baseline studies for installation facilities, and collecting of more data on the oil wells - which are expected to feed into the major FEED project to be undertaken by Technip.
The FEED for the oil fields is separate from the FEED study ongoing for the 1,445km oil pipeline also known as the East African Crude Oil Pipeline (EACOP) running from Hoima via Kiboga, Mubende, Ssembabule, Masaka and Rakai en route to Tanga port at the Indian Ocean. The pipeline FEED announced last month was awarded to US based Gulf Interstate Engineering.
Optimism of the refinery
Ms Muloni also said they are in advanced stages of zeroing down on a lead financer/designer for the Shs13 trillion refinery of 30,000 bpd but will be scaled up to 60,000 bpd.
Following the heartbreaking exit of the Russian consortium, RT Global Resources, and consequently government going back to the drawing table, she revealed that they had zeroed down on three lead investors and due diligence is ongoing to arrive at the most qualified investor for the project.
This process, she said, will be concluded by end of next month.
After the recommendation by Foster Wheeler in 2010 that the refinery was viable the government had moved and already acquired land, about 29 square miles in Hoima.
Looking at the distance so far covered, since announcement of discovery of commercial oil volunes in 2006, technocrats steering the sector often exude optimism that the 2020 date is achievable- notwithstanding that the remaining two phases leading to first oil are capital intensive, and more challengingly at the current gloom in the global oil market.