Update of Developments in Uganda's Oil and Gas Sector

7/30/2019 Update of Developments in Uganda's Oil and Gas Sector

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1

MINISTRY OF ENERGY AND MINERAL DEVELOPMENT

Presented By:

Petroleum Exploration and Production Department

at

Training Workshop for Radio Journalists

by

Africa Centre for Media Excellence

22ND APRIL, 2013


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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t

PRESENTATION OUTLINE

1. INTRODUCTION

Extractive Industry

Petroleum Value Chain

Sedimentary Basin Concept

History

2. STATUS OF THE OIL AND GAS SECTOR

3. LEGAL AND REGULATORY FRAMEWORK

4. NATIONAL OIL AND GAS POLICY FOR UGANDA

Basis And Process Of Formulation

Achievements in Policy Implementation (2008 To Date)

5. OPPORTUNITIES AND BENEFITS

6. EXPECTATIONS FROM THE MEDIA

7. CONCLUDING REMARKS

2


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1.1 EXTRACTIVE INDUSTRY

Petroleum Latin Petrarock and Oleumoil-natural Fluid composed of a mixture of hydrocarbon molecules. Used to refer to both crude oil and natural gas A mixture of oil and/or gas crude oils, natural gas. Could also be solid asphalt

Formed from the remains of dead plants and animals buried millions of years ago. Certain geological conditions must have existed within the oil-rich rocks.

HydrocarbonHydrocarbons are organic chemical compounds that consist entirely of carbon and hydrogen, andrange from simple molecules such as methane, to polymers such as polystyrene, which consists ofthousands of atoms. Fossil fuels, such as oil and natural gas, are naturally occurring mixtures of

hydrocarbons

Mineral A mineral is a naturally occurring inorganic solid, with a definite chemical composition, and an

ordered atomic arrangement. Minerals are naturally occurring, inorganic (are not made up fromplants or animals) and are solid, among other characteristics.

INTRODUCTION


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CHARACTERISTICS

Oil, gas, and solid mineral resourcesthe non-renewable extractive industries

are major contributors to many developing countries economies.

Proper stewardship of extractive industries and the revenues they generate has tremendous potential to

lift people out of poverty and contribute to sustainable development ;

infrastructure development

social service delivery

These industries create jobs directly and indirectly, transfer technologies and knowledge

Extractive industry revenue tends to be uncertain, volatile, and exhaustibleall characteristics that pose

enormous challenges to policymakers.

Many resource-rich, developing countries have fallen prey to the resource curse, underwhich poor

policy choices and corruption have exacerbated cycles of poverty and conflict.

4

1.1 EXTRACTIVE INDUSTRY

Introduction (2)


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8. Market Power Host governments may not be able to exercise

appreciable control over the flow of someresources to the market. Largest oil producersaccount for 60% of world production.

9. Exhaustibility Finiteness of potential production

10. Environment Significant environment challenges both from the

inescapable footprint of extraction activities andaccidental oil spillage plus other damages

Significant gas flaring and venting

11. Asymmetrical Information Policy makers will generally have less

information of the geology and commercialcircumstances at all stages of the value chain

INTERFACE BETWEEN MINERALS AND PETROLEUM

1. Both are extractive industries2. High sunk costs, Long production periods

3. Both are found under the surface but at differentdepths4. For case of Uganda, as of now both sectors are

under one Ministry5. Subject to Uncertainty at all stages

Revenues are volatile and exhaustibleallcharacteristics that pose enormous challenges topolicymakers.

Geology posses its own uncertainty

6. Substantive resource rent Royalties Corporate tax Import tax VAT others

5

Similarities

Introduction (3)

1.1 Extractive Industry


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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t6

Introduction (4)

1.1 Extractive Industry

Petroleum

1. Found deep in the subsurface2. complex technology is needed forextraction

3. Not a mass employer4. High risk high reward industry5. Petroleum Exploration and Production Act

19856. High initial investment capital7. Revenue sharing mechanism is different

(landlord does not get royalties) onlyregional and central government getroyalties

Minerals

1. Found near the surface2. Less complex technology3. Can be a mass employer since anyone

is free to extract minerals in somegazetted areas

4. Minimum risk involved5. Mining Act, 2003 and the Mining

Regulations of 2004 as well as theMinerals (Prohibition of Exportation) ActCap 147.

6. Does not require high initial investmentcapital

7. Land lords receive royalties

6

Differences

INTERFACE BETWEEN MINERALS AND PETROLEUM (2)


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LICENSING

EXPLORATION

APPRAISAL

DEVELOPMENT

PRODUCTION

DECOMISSIONING

U P S T R E A M M I D S T R E A M D O W N S T R E A M

TRANSPORTATION

REFINING

GAS PROCESSING

DISTRIBUTION

MARKETING

SALES

Exploration & Appraisal: Search for petroleumaccumulations , Includes Establishing presence,

Content ease of flow and Extent of distributionDevelopment: Preparing reservoir forProduction, Preparing facilities for Collection andProcessing

Production: Removal of petroleum fromsubsurface reservoirs to the surface, Preparingpetroleum for Transportation and Refining

Converting oil and gas intomarketable products andchemicals

Marketing and distributionfor Customer satisfactionand Profit earning

Efficient movement of oiland gas products in bulk

mainly by pipeline, roadtankers, ocean tankers andrail wagons

Introduction(5)

1.2 The Petroleum Value Chain


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1.3 SEDIMENTARY BASIN CONCEPT

Overburden Rock

Seal Rock

Reservoir Rock

Source Rock

Underburden Rock

Basement Rock

Top Oil Window

Top Gas Window

Geographic Extent of Petroleum System

Essential

Elements

of

Petroleum

System

O O

Sedim

entary

BasinFill

O

Stratigraphic

Extent of

Petroleum

System

Pod of ActiveSource Rock

Extent of Prospect/Field

Extent of Play

Overburden Rock

Seal Rock

Reservoir Rock

Source Rock

Underburden Rock

Basement Rock

Top Oil Window

Top Gas Window

Geographic Extent of Petroleum System

Essential

Elements

of

Petroleum

System

(modified fromMagoonand Dow, 1994)(modified fromMagoonand Dow, 1994)

O O

Sedim

entary

BasinFill

O

Stratigraphic

Extent of

Petroleum

System

Pod of ActiveSource Rock

Extent of Prospect/Field

Extent of Play

Sedimentary Basin

A depressioncreated as aconsequence of

subsidence, thatfills with sediment

Thick layers ofsedimentary rocks

get laid down overa long period oftime

Introduction (6)


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Source rock;A rock rich in organic matter which, if heated

sufficiently, will generate oil or gas.

Reservoir rock;A rock having sufficient porosity andpermeability to store and transmit fluids.

Porosity; The percentage of pore volume or void space, or thatvolume within rocks that can contain fluids. The fluids may bewater, air, oil or gas.

Permeability; The ability of a rock to transmit fluids.

Migration; Hydrocarbon migration and movement is possible ifthe reservoir rock has good porosity and permeability

Cap/Seal;A relatively impermeable rock (commonly shale,anhydrite or salt) that forms a barrier or cap above and aroundreservoir rock such that fluids cannot migrate beyond thereservoir.

Graben; A graben is a depressed block of land bordered by

parallel faults. Graben is German word for ditch.

Introduction (7)

Presentation on how a Graben is formed
http://en.wikipedia.org/wiki/Image:Horst_graben.jpghttp://en.wikipedia.org/wiki/Image:Horst_graben.jpg


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Areas with Potential for Petroleum Exploration in Uganda

Six Sedimentary Basins in Uganda

1. Albertine Graben

2. Hoima Basin

3. Kadam-Moroto Basin

4. Lake Kyoga Basin

5. Lake Wamala Basin

6. Lake Victoria Basin

The Albertine Graben is the

most prospective

Lake Victoria

Lake Kyoga

Lake

Edward

Kadam-MorotoBasin

L. Wamala

Basin

UGANDA

KENYA

SUDAN

TANZANIA

DRC

RWANDA

Hoima

Basin

Basins

whose

potential is

under

investigation

Not Prospective

Introduction (8)

10Source : PEPD


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Sedimentary Basin in Uganda (Source: PEPD)

Introduction(9)

The Albertine Graben

Lake Malawi

Lake

Tanganyika

Lake Albert

Eastern Arm

Tanzanian

Craton

The Graben forms the northernmost part of the Western arm ofthe EARS

Runs along Ugandas westernborder with DRC

Tertiary basin 500 km long,averaging 45 km wide and

23,000 sq km in Uganda.

1300 km from the coast

11


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Oil seepages in the Albertine Graben documented in the 1920s.

Early exploration work between 1930 1960 was not successful.

No petroleum exploration activity between 19601980s due topolitical instability and colonial policy.

Systematic and modern exploration effort commenced in the1980s.

Enactment of the Petroleum Exploration and Production Act, 1985.

Commencement of specialized training in petroleum Geosciencesby Ugandans in 1986

Formation of PEPD in 1991.

Licensing of EA 3 (Semliki Basin), to Heritage in 1997.

First oil discovery in 2006 by Hardman Resources /Energy Africa(now Tullow Oil).

Licensing halted after first discovery.

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Stratigraphic wells and early oil seep reporting (Source:

PEPD)

Lak

eAlb

ert

River Kafu

UGANDA

D.RCON

GO

0 50 km

LEGEND

Rift Sediments

International Boundary

Major Roads

Faults

Rivers

HOIMA

MASINDI

FORT PORTAL

MAHAGIN

Oil Seep

Statigraphic Wellsown

20 N

10 N

20 N

10 N

310 E

310 E

13 Shallow

wells (1956)

9 Shallowwells (1956)

20 Shallowwells (1956)

SECTOR


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STATUS OF THE OIL AND GAS SECTOR

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EXPLORATION

AND APPRAISAL

DEVELOPMENT

AND

PRODUCTION

INFRASTRUCTUR

E


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The Albertine Graben is subdivided into17 Licence Areas

Four (4) Active Production SharingAgreements (PSAs)

3 License Operators (Tullow, Total,CNOOC)

Next round of licensing to be undertakenthrough competitive bidding

Licensees in the country changing fromsmall to major oil companies.

ACREAGE/LICENCES

Status of the Oil and Gas Sector(2)


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DATA ACQUIRED

Large amounts of geological, geophysical andengineering data acquired by the Ministry mainly toattract investment

Over 10,000 km2 of Uganda has been geologically

mapped for petroleum exploration 7,500 line km of gravity and magnetic data

9,578 line km of aeromagnetic data

GRAVITY, MAGNETIC, SEISMIC AND GEOLOGICAL MAPPING

50 0 50Km

(Kilometers)

Arc 1960 / UTM zone 36N

-217.9 -176.8 -158.4 -148.3 -142.4 -137.6 -132.4 -125.4 -119.8 -116.5 -111.3 -92.7

Gravity anomaly(mGals)

LEGEND

International boundary

Roads

Lakes

Exploration Areas

-100'

-030'

000'

030'

100'

130'

20

0'

230'

300'

330'

-100'

-030'

000'

030'

100'

130'

2

00'

230'

300'

330'

2930' 3000' 3030' 3100' 3130' 3200'

2930' 3000' 3030' 3100' 3130' 3200'

612-

8

0

2

-

80

2-

00

2-

29

1-

481-

481-

-17

6

6

7

1

-

67

1-

-1

6

8

8

6

1

-

86

1-

-1

60

- 160

061-

061-

-15

2

-

1

5

2

-152

-1

52

25

1-

251-

-

1

4

4

44

1-

4

4

1

-

441-

-

1

44

4

4

1-

4

4

1

-

-1

3

6

63

1-

6

3

1-

-

1

3

6

-1

36

631 -

63

1-

63

1-

-

1

3

6

-

1

2

8

-1

28-

12

8

-

1

2

8

821-

-

1

2

8

82

1-

821-

-1

20

-12

0

0 2 1 -

02

1-

02

1-

0

2

1-

021

-

-

1

1

2

-1

12

-11

2

21

1-

211

-

-1

04

-10

4

4

0

1

-

-

1

0

4

401-

401-

-

9

6

69

-

7,194 line km of 2-D seismic data

1,608 km2

of 3-D seismic data, on land and Lake Albert The data acquired have identified several hydrocarbon

Prospects and Leads in the Albertine Graben

Some of the Prospects have been followed up bydrilling


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DATA ACQUIRED

WELLS DRILLED; 90 Exploration and Appraisal

Wells; 79 successful (87% success rate)

Drilling success trend (Source : PEPD)

JOBI DISCOVERY

JOBI-1

JOBI-2

JOBI-2A

JOBI-3

RII DISCOVERY

RII-1

NGIRI DISCOVERY

NGIRI-1

NGIRI-2

NGIRI-3

MPYO DISCOVERY

MPYO-1

MPYO-3

GUNYADISCOVERY

GUNYA-1

NGEGEDISCO VERY

NGEGE-1

NGEGE-2 & 2A

NGEGE-3

NGEGE-4

NGEGE-5

NGEGE-6

NGARADISCOVERY

NGARA-1

KIGOGOLEDISCOVERY

KIGOGOLE-1

KIGOGOLE-2

KIGOGOLE-3

KIGOGOLE-4

KIGOGOLE-5

KIGOGOLE-6 &6A

TAITAI DISCOVERY

TAITAI-1

TAITAI-1A

KASAMENE &WAHRINDHI

DISCOVERIES

WAHRINDI-1

KASAMENE-1

KASAMENE-2

KASAMENE-3&3A

NSOGADISCOVERY

NSOGA-1

NSOGA-2&2A

NSOGA-5

KARUKADISCOVERY

KARUKA-1

KARUKA-2

NGASSADISCOVERY

NGASSA-1

NGASSA-2

WARAGADISCOVERY

WARAGA-1

MPUTADISCOVERY

MPUTA-1

MPUTA-2

MPUTA-3

MPUTA-4

MPUTA5

NZIZI DISCOVERY

NZIZI-1

NZIZI-2

NZIZI-3

KINGFISHER DISCOVERY

KINGFISHER-1&1A

KINGFISHER-2

KINGFISHER-3&3A

TURACO DISCOVERY

TURACO-1

TURACO-2

TURACO-3

NGAJI-1

MVULE-1

ITI-1

AVIVI-1

AWAKA-1

KANWYATABA-1


1 1 1 1

5 5

13

9 10 8

223

3

2

0

1

2

3

4

5

6

7

8

0

5

10

15

20

25

30

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Proje

Number

ofWells

YEAR

DRILLING SUCCESS TREND IN THE ALBERTINEGRABEN

Discovery

88%

112%

DRILLING SUCCESS RATE

Success


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DISCOVERIES AND RESOURCES

21 oil and/or gas discoveriesmade to date.

Over 3.5 billion barrels of

STOIIP established.

Estimated 1.2 billion barrelsof recoverable oil equivalent.

Appraisal of the discoveries isongoing.

Less than 40% of theAlbertine Graben has beenevaluated.

Discoveries in the Albertine Graben (Modified from Rubondo



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ONGOING WORK; APPRAISAL

18

Exploration Area 1 and 1 A (Operated by TOTAL)

Seven Discoveries; Jobi, Rii, Mpyo, Ngiri, Gunya, Lyec and

Jobi-East are under appraisal.

3-D Seismic Survey is ongoing

Exploration Area 2 (Operated by TULLOW) Seven Discoveries; Kasamene, Waraga, Ngege, Nsoga,

Kigogole, Wahrindi and Ngara are under appraisal.

Kingfisher Discovery Area (Operated by CNOOC) - Hoima

Kingfisher Oil field due for issuance of a Production Licence

DEVELOPMENT AND PRODUCTION PLANNING

Field Development Plans and Petroleum Reservoir reports for

three discoveries Mputa-Nzizi and Kingfisher are under review.



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INVESTMENTS IN THE SECTOR

19

INVESTMENTS MADE

1st Major Discovery


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INVESTMENTS IN THE SECTOR (1)

20

INVESTMENTS MADE

Industry is capital intensive and high risk

So far, risk capital invested in seismic surveys, exploratory and appraisal drillingto a total of US$1.7 billion

Sharp increase in investment after first discovery

This is significant investment and will rise to many fold with further investmentsexpected in field development, production of the crude oil, processing andtransportation facilities

The costs incurred in the sector in the country so far are classified as FindingCosts

Means the costs of finding commercial reserves of oil in USD per barrel

On the global scale, the finding costs range between $5 - $25 per barrel


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Ugandas Petroleum Exploration and Production is Governed by:

The Petroleum (Exploration, Development and Production) Act 2013

The Petroleum Regulations (1993)

Model Production Sharing Agreements (PSAs)

Environment, Wildlife, Water , Income Tax, Land, Statutes and Guidelines

The National Oil and Gas Policy for Uganda, 2008

21

LEGAL AND REGULATORY FRAMEWORK

THE NATIONAL OIL AND GAS POLICY FOR


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The National Oil and Gas Policy (NOGP) is thekey document providing guidance to the Oil andgas sector in Uganda.

It was developed to comprehensively addressissues of exploration, development, productionand utilisation of the countrys oil resourcesfollowing the discovery of commercial oilreserves in 2006.

NOGP was approved by cabinet in January 2008after a thorough consultative process.

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THE NATIONAL OIL AND GAS POLICY FORUGANDA


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Key Policy objectives for the oil and gas sector before the National Oil and Gas

Policy for Uganda were covered in the Energy Policy of 2002 and these were;

1.Capacity building and institutional development,

2. Investment promotion through acquisition of field geological, geophysical andgeochemical data and attraction of oil companies to invest; and

3. Monitoring compliance of agreed work programs, budgets and environment

protection.

The discovery and confirmation of commercial reserves of petroleum in the countrybrought about new issues that necessitated putting in place a NATIONAL OIL AND

GAS POLICY for the country.23

National Oil and Gas Policy (2)


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Policy Goal:To use the countrys oil and gas resources to contribute to early

achievement of poverty eradication and create lasting value to society.

Policy has ten objectives, each with strategies and actions.

Policy available in print and website;www.petroleum.go.ug

An abridged and translated version of the policy is being developed.

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National Oil andGas Policy (3)


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1. Presentation of new petroleum legislation in parliamentFebruary 2012 (Petroleum (Exploration,

Development and Production) Bill 2012 and Petroleum, Refining, Conversion, Transmission andMid stream Storage) Bill, 2012 that were passed during December 2012 and February 2013. The

Petroleum (Exploration, Development and Production) Act 2013 was gazetted and became

effective on 5th April 2013.

2. Structures for new Institutions (Petroleum Authority and National Oil Company) developed.3. Oil and Gas Revenue Management Policy developed and Public Finance Bill 2012 presented to

parliament and provides for petroleum revenue management.

4. Over 10,000 km2 of area with high petroleum potential have been relinquished and will be

available for relicensing along with the unlicensed areas through competitive bidding rounds.

5. Resources in 2008 were 300 million barrels of oil in place. Today the resources are over 3.5

billion barrels of oil in place.

6. A comprehensive feasibility study for in country refining has been concluded and planning for

refinery development is on-going.

ACHIEVEMENTS IN POLICY

IMPLEMENTATION


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7. Petroleum transportation and storage study for crude and products commenced.

8. Close monitoring of environment and biodiversity being undertaken; EIAsundertaken; Environment Sensitivity Atlas developed; Strategic EnvironmentAssessment is on-going; Environment Monitoring Plan in Place, Guidelines forWaste Management and Operations in protected areas are in place; Multi-

Institutional Monitoring.

9. A study on the opportunities and challenges for Ugandans participation in the oiland gas sector has been finalised and a strategy for its implementation is beingdeveloped.

10. Support for the introduction of training courses in Ugandan Universities andtechnical institutions focusing on petroleum industry; MUK and UPIK commencedpetroleum courses.

11. Communication Strategy developed and under implementation; dialogue and

consultations with stakeholders are on-going.

Achievements In Policy

Implementation (2)


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OPPORTUNITIES AND BENEFITS

Corporate Social Responsibility Initiatives.

Support to Health, Education and Social

Enterprise

Infrastructure Development.

Improved road networks and access to

previously remote areas Improved communication facilities

27Ministry of Energy and Mineral Development

Kaiso Primary School, Hoima

Construction of Hoima-Buseruka-

KaisoTonya road

Buliisa Health Centre IV


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P e t r o l e u m E x p l o r a t i o n a n d P r o d u c t i o n D e p a r t m e n t28Ministry of Energy and Mineral Development

Revenue Generation to support service provision

Increased foreign investment and economic rating for the country

Use of Hydrocarbons for power generation envisaged to alleviate power shortages andcontribute to the energy mix of the country

Technology Transfer and the opportunity to develop a highly skilled man power in oil and gas

related disciplines Stimulation of other industries such as the manufacturing sector, petro-chemical industry

which will have spill-over benefits.

Security of supply: The discovery of oil and gas in Uganda is a key contributor to energysecurity.

Industrialization: The petroleum industry will lead to a rapid industrialization of the country.

Petroleum is the raw material for many chemical products, including pharmaceuticals,solvents, fertilizers, pesticides, and plastics.

Investment opportunities

Opportunities and Benefits (2)


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Service Industry

Drilling Products and Services Reservoir Engineering studies Transport Clearing and forwarding Environment consultancy Construction/ Civil works

Fabrication and Facility Maintenance(plumbing, electrical, mechanical)

Man power management services recruitment

Heavy equipment and machinery(cranes, folklifts)

Support services (Catering, Camps etc) Banking & Insurance Legal services Health services Housing Vocational training in relevant skills Supply of Agricultural products:

Selected Examples of Investment Opportunities

Exploration and Development Participation in licensing rounds Geophysical surveys, particularly seismic Drilling , FEED and EPC Equipment supply and/ or leasing (boats, barges, house

boats, etc) Supply of casings for boreholes

Partnerships

With licensed Companies

With Government to: Develop required infrastructure create training institutions specialising in petroleum

Production Crude oil transportation & storage Refining and other infrastructure developments like

pipelines Power generation by Independent Power Producers Future petrochemical industry


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Appreciate the progress and achievements that have been made in the sector.

Oil and Gas Industry Characteristics (High Risk Industry, High Reward, Capital intensive, Internationaland has potential to disrupt other sectors and can also be easily disrupted) require responsible media toavoid disruption of the sector and contribute to managing expectations.

Be proactive in reporting about the oil and gas sector and ensure objective coverage of the sector.

Seek the correct information from the right sources to avoid misrepresentations based on selfishinterests; Get the right mix between political debates and expert information; there is tendency to relymore on politicians than experts for media stories.

Network with key actors in the sector and obtain information with them to the extent that does not offendyour professionalism in order to deploy reporters optimally and for key tasks. Key actors include MEMD,Finance, Parliament, Oil companies, NEMA, UWA, URA etc.

Find space and airtime in your channels for the sector, even when there are no "fireworks" around thesector to give people information. Oil stories make interesting reading/listening.

Work closely with the MEMD and PEPD Communications Office to ensure information flow.

30

EXPECTATIONS FROM THE MEDIA


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CONCLUDING REMARKS

31

The intensive promotional and exploration efforts to establish Ugandas petroleum potential were

successful as commercially exploitable reserves of oil and gas were confirmed in the country in 2006.

Efforts are now being made to commercialize the discovered resources, initially through power

generation and subsequently through refining of the crude oil.

Investment in the sector is expected to increase especially as preparation of the infrastructure required

for production is put in place.

There is need to ensure that the industry is regulated very well especially since errors can be very costly

in terms of money, environment and lives.

The key challenges in the sector include the general publics anxiety and expectation and the need toput in place an appropriate institutional and regulatory framework for the sector.

These and other challenges in the sector are well identified and described in the countrys oil and gas

policy and therefore implementation of this policy should go along way in addressing these challenges.

Ugandans must continue to position themselves to benefit from the opportunities in the sector.


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Petroleum Exploration and Production DepartmentMinistry of Energy and Mineral Development

Email: [email protected]

Web: www.petroleum.go.ug

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Update of Developments in Uganda's Oil and Gas Sector

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