Uganda Finally Signs FID With the International Oil Companies
On 11th April 2021, Uganda Government signed the along-awaited Final Investment Decision (FID) with International Oil Companies Total E&P and China National Offshore Oil Company (CNOOC). FID represent the point at which the International Oil Companies (IOC) and the Government of Uganda through the Uganda National Oil Company (UNOC) commit to oil field development. This will certainly unlock billions of dollars of Investment in Uganda’s oil and gas sector.
Previously Total, Uganda and Tanzania had planned to announce the FID on 22nd March 2021 in Entebbe. The authorities postponed this following the death of Tanzania’s President John Pombe Magufuli.
Uganda discovered approximately 6.5 Million barrels of commercial oil deposits in its mid – western Uganda (Albertine graben) over 14 years ago but extraction had delayed due to the protracted negotiations with the oil majors.
East African Crude Oil Pipeline ( EACOP) by Total E&P project is one of the midstream commercialization project for Uganda’s oil and gas industry. This deal will pave way for the longest heated crude oil pipeline in the world at 1,443 km, running from Kabaale in Hoima District to Tanga Port in Tanzania. Total E & P has 72% of the 1,443km pipeline, Uganda has 15% shareholding, the China National Offshore Oil Corporation (CNOOC) owns 8%, while Tanzania’s stake is 5%, and Uganda’s interest in the pipeline is managed by the Uganda National Oil Company while the Tanzania Petroleum Development Corporation oversees Tanzania’s interests.
The Ugandan government has heavily invested in the infrastructure, technology, security, legal and fiscal framework as well as human resource to ensure that international oil companies are satisfied. It has also made great strides to set in place robust regulatory regime and a number of laws have been passed i.e. Petroleum Upstream (Exploration, Development and Production) Act and Midstream (Refining, Conversion, Transmission and Midstream storage) Act, that came into force in 2013 together with these corresponding regulations in 2016.
Similarly, the relationship between licenses and the government is well codified in Production Sharing Agreements (PSAs), the laws and regulations of the land, ensuring that the interest of International players are protected.
By and large, it’s worth noting, that this is the best opportune time to invest in Uganda as we await to commercially start producing oil by 2024.
Andrew Wambi,
Partner, Springs Advocates,
Head, Natural Resources & Dispute Resolution Department.
