The True Oil And Gas Narrative

Frequently Asked Questions (FAQs) About The Overall Oil And Gas Sector

1. Where in Uganda are Petroleum activities taking place?

Oil and Gas exploration and development activities in Uganda are currently taking place in the Albertine Graben. The Graben is part of the East African Rift System and runs along Uganda’s western border with the Democratic Republic of Congo (DRC).

The Graben is approximately 500 km long, averaging 45 km in width and 23,000 square kilometres in Uganda.

2.What is the Petroleum Value Chain?

The Petroleum Value Chain  is the series of activities staring from exploring for oil to consumption of petroleum products. The Petroleum Value Chain has three major phases, namely; upstream, midstream, and downstream.

Upstream covers exploration, development and production of petroleum together with decommissioning.

Exploration refers to the search for petroleum accumulations and includes appraisal of the same to establish the extent (distribution) of the petroleum accumulation below the earth’s surface and the ease of flow of the petroleum from this accumulation.

Development involves preparing for production by putting in place facilities and infrastructure for collection, transportation and processing of crude oil and gas.

Production is the removal of petroleum from the accumulations below the earth’s surface to the surface, and preparing the petroleum for transportation and refining.

Midstream includes bulk transportation of petroleum commodities (crude oil and natural gas) and products (gasoline, diesel, jet fuel, etc), refining of oil and conversion of gas. It also includes converting oil and gas into marketable products and chemicals.

Downstream deals with distribution, marketing and sale of petroleum products. In some countries, downstream and midstream operations are considered together as downstream operations.

3. When did Uganda confirm commercial oil and gas resources?

Uganda confirmed commercial petroleum resources in 2006. Efforts to find oil in Uganda started as far back as the
1920s. These efforts led to the identification of surface seepages of oil and drilling of shallow wells around these seepages before 1945. One deep exploration well (Waki-1) was also drilled near Butiaba, in Buliisa district during 1938.

These initial efforts were not successful in establishing commercial deposits of petroleum in the country. Renewed
and consistent exploration efforts commenced in the 1980s which culminated into confirmation of commercial
petroleum resources in Uganda during 2006.

4. How much oil has been discovered in Uganda?

The estimate resources in the country have increased from 300 million barrels in 2006 to 2 billion and 3.5 billion barrels in 2010 and 2012 respectively.

As at June 2016, the discovered resources in the country were estimated at 6.5 billion barrels of oil equivalent in place with about 1.4 to 1.7 billion barrels of these resources recoverable (1 barrel is equivalent to 159 litres).

The area explored presently represents less than 40% of the total area with the potential for petroleum production in the Albertine Graben. There is therefore potential for additional petroleum resources to be discovered in the country when additional exploration is undertaken.

5. Can all the 6.5 billion barrels of oil in place be recovered?

Geological factors including the fact that oil in the subsurface is stored in rocks with pores (similar to water in a sponge) and within structures, makes it impossible to recover 100% of the resources.

The amount of oil to be recovered depends on the properties of the rock such as how the pores within the rock are connected to one another, reservoir pressures and type of oil, among others.

Globally, an average of 20 to 30 per cent of the oil in place is recovered economically using the available technologies. Enhanced Oil Recovery (EOR) methods are also often used to increase the amount of oil recovered from an oil field using different technologies to supplement the natural production.

EOR is used to improve movement of oil in the oil field and the different methods of EOR include polymer flooding, gas injection, and steam flooding.

6. How many Petroleum discoveries have been made in Uganda to date?

About twenty-one (21) oil and/or gas discoveries have been made in Uganda.

See Map

7. Which oil companies are licensed in Uganda?

The oil companies currently licensed to explore, develop and produce petroleum in the country are; Total E&P Uganda BV., Tullow Uganda Operations Pty Ltd, Tullow Uganda Limited and China National Offshore Oil Corporation (CNOOC) Uganda Limited.

8. Who owns the oil and gas resources in Uganda?

Article 244 of the Constitution of Uganda vests the ownership and control of minerals and petroleum in the Government on behalf of the people.

The Government therefore holds all resources in trust for the people of Uganda. The Constitution also empowers Parliament to make laws regulating the exploration and exploitation of minerals and petroleum.

In this regard, Section 4 of the Petroleum (Exploration, Development and Production) Act 2013 vests petroleum resources in the Government on behalf of the people.

9. How long will the country’s oil and gas resources last?

In Uganda, at a projected peak production rate of about 200,000 barrels of oil per day, it is estimated that the current discovered resources can last 20-30 years.

The length of time that oil and gas resources last in any given country largely depends on the amount of discovered resources and the rate at which these resources are produced. This rate is determined by many factors, including technical, strategic and economic reasons.

However, additional exploration and appraisal is expected to be undertaken in the country, and this could lead to additional resources being discovered in the country, hence prolonging this production period.

It is important that these resources are produced gradually in an efficient manner and at an economic rate that will also provide a sustained benefit to the country.

10. How far in the ground does the petroleum lie?

The depth at which hydrocarbon deposits are found varies greatly around the world. Very shallow deposits of less than 30metres were found in the early days of exploration.

Today, it is common to produce oil from more than 3,000 metres. In Uganda, petroleum has been encountered between 290 metres and 3,000metres in the discoveries that have been made in the Albertine Graben to date.

11. What is the quality of Uganda’s crude oil?

Different types of crude oil are produced around the world. Two of the most important quality characteristics of oil are its density and sulphur content. Density ranges from light to heavy, while sulphur content is characterized as sweet or sour.

Crude oils that are light (with degrees of API gravity above 360) and sweet (low sulphur content) are usually priced higher than heavy, sour crude oils.

Uganda’s crude oil has; API range of 170 ~ 330, with a low sulphur content but is waxy with an average pour point of 400C and hence solidifies at room temperature. Uganda’s crude oil is therefore described as sweet and medium to heavy

12. What happens after a petroleum discovery has been made?

In accordance with section 66 of the PEDP Act 2013, when a discovery is made, the licensee is required to notify the
Government and submit a technical evaluation.

The licensed Oil Company appraises the discovery to determine the extent of the discovery and the characteristics of the crude oil therein by drilling additional wells (figure 5) and/or undertaking well testing.

Following completion of appraisal and interpretation of the data acquired during appraisal, the company applies for a production licence and this application is supported by a Field Development Plan (FDP) which details how the company intends to produce and transport the petroleum in the discovery; and a Petroleum Reservoir Report (PRR) that describes the technical understanding of the reservoir below the surface.

These reports are reviewed by Government and discussed with the company until agreement is reached and a production license is issued. The company then prepares the field for production by drilling injection and production
wells and also putting in place other surface facilities for production and processing of crude oil.

13. What is the plan for commercializing the discovered oil and gas resources?

The National Oil and Gas Policy, 2008 recommends value addition through refining. A Memorandum of Understanding (MoU) between Government and the Licensed Oil Companies which provides for a commercialization plan for the development of the discovered oil and gas resources in the country was concluded during February 2014.

The MoU provides for the use of petroleum for power generation, supply of Crude Oil to the refinery to be developed in Uganda and export of Crude Oil through an export pipeline or any other viable options.

14. Has commercial production of oil and/or gas started?

Commercial production can only commence following the issuance of a production license, which authorizes the holder to produce petroleum from a field whose appraisal has been completed and development plan approved.

Commercial production of petroleum also requires putting in place infrastructure such as processing plants to
separate the crude from impurities like sand and water, pipelines for transportation of crude from the fields, a refinery to transform the crude into the various products such as Diesel, Petrol, and Kerosene and facilities for the export of crude oil.

These and other infrastructure such as the road networks, water and electricity in the Albertine Graben
are being upgraded to support these developments. Full scale production has been earmarked for 2020, after the necessary infrastructure has been put in place.

15. How can the gas resources be utilized?

The gas resources are commercially viable and can be used for power generation. In addition, natural gas can be used for domestic purposes such as heating and cooking.

It can also be used as fuel for vehicles, the production of iron and steel from iron ore, in fertilizer plants and as a chemical feedstock in the manufacture of plastics and other commercially important organic chemicals.

Natural gas can also be re-injected into the reservoirs to maintain pressure to support production of crude oil through enhancement of oil recovery.

Alternatively, after processing, gas can be used for on-site electricity generation or used as feedstock for different petrochemical industries. Another possibility is to export natural gas as a liquid. Gas-to-liquids (GTL) is a developing technology that converts natural gas into synthetic gasoline, diesel, or jet fuel.

16. Why is Uganda opting for development of a refinery and a crude oil export pipeline?

Objective 4 of the National Oil and Gas Policy (2008) for Uganda is to promote valuable utilization of the country’s oil and gas resources through in-country refining of crude oil.

In this regard therefore, Government undertook a feasibility study on in-country refining in 2010 and the study recommended that development of a refinery in Uganda was the most economic option for the utilisation of Uganda’s crude oil.

The refinery will also ensure security of supply of petroleum products to Uganda. In addition the refinery will
create jobs for Ugandans, promote industrialisation while saving foreign exchange which would have been used to import petroleum products.

A crude export pipeline will provide an alternative outlet for produced oil to ensure return on investment for the licensees and Government. Studies on the crude export pipeline routing were
conducted and the Hoima (Uganda) – Tanga (Tanzania) route was selected as more secure, at a cheaper cost and a lower tariff.

17. What are the Policy and Regulatory frameworks governing the country’s petroleum sector?

A National Oil and Gas Policy for Uganda was approved by Cabinet in 2008. As part of efforts to operationalize the Policy, new legislation for the oil and gas sector in Uganda has been developed.

The Petroleum Exploration, Development and Production (PEDP) Act 2013; and the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013 became effective in April 2013 and July 2013 respectively.

The former repealed the Petroleum Exploration and Production Act of 1985. In addition, the Ministry has developed regulations in line with the two Acts and these are;

  • The Petroleum (Exploration, Development and Production) Regulations 2015
  • The Petroleum (Exploration, Development and Production) (Health, Safety and Environment) Regulations 2016
  • The Petroleum (Exploration, Development and Production) (National Content) Regulations 2016
  • The Petroleum (Exploration, Development and Production) (Metering) Regulations 2016
  • The Petroleum (Refining, Conversion, Transmission and Midstream Storage) Regulations 2016. The Petroleum (Refining, Conversion, Transmission and Midstream Storage) (National Content) Regulations, 2016.
  • The Petroleum (Refining, Conversion, Transmission and Midstream Storage) (Health, Safety and Environment) Regulations, 2016.

This is in addition to other sectoral laws, statutes and guidelines on Environment, Wildlife, Water, Income Tax, Land, among others

18. What is the Institutional Frame work for the Sector?

The National Oil and Gas Policy highlights the roles of the different Government institutions led by the Ministry of Energy and Mineral Development.

In line with the policy three key separate institutions have been created with the following roles:-

  • The Directorate of Petroleum in the Ministry which is responsible for policy making; coordinating the development of the sector; and undertake licensing and national and capacity building among other roles.
  • The Petroleum Authority of Uganda (PAU) regulates the different players in the sector, including enforcing compliance and monitoring the operations of oil companies.
  • The Uganda National Oil Company (UNOC) as a separate commercial entity responsible for state participation in the licences and other related business aspects.

The detailed roles of the Petroleum Authority and National Oil Company are provided in the PEDP Act 2013. The Boards of Directors for PAU and UNOC were inaugurated in October 2015, and recruitment of the Executive Director and the Chief Executive Officer respectively by the respective boards of directors together with top management was undertaken during 2016.

The UNOC and PAU are now operational.

19. How can the National Oil and Gas Policy and the Laws be accessed?

Hard copies of the National Oil and Gas Policy for Uganda and the laws and regulations can be accessed from the Ministry of Energy and Mineral Development, and soft copies from both MEMD and PEPD’s websites.

As part of the implementation of the National Communication Strategy for the Oil and Gas Sector in Uganda, government has developed a popular/ simplified version of the policy which has been translated into
eleven local languages, which can also be accessed as highlighted above.

20. What efforts are in place to keep Local Communities informed and enable their participation in the sector?

The National Communication Strategy for the oil and gas sector in Uganda identifies communities in the Albertine
Graben as one of the key audiences for oil and gas information since they host oil and gas operations and infrastructure for the developments.

Information dissemination to communities is undertaken through Community consultations and sensitization meetings before and during operations. Radio talk shows are carried out periodically to relay information to communities in areas of operation and across the country on topics of common interest.

In addition, the Community Development Officers based at the district and community levels are being capacity built to also support the dissemination of information on the oil and gas sector to the communities.

Local communities supply most of the unskilled labour required during implementation  of oil and gas activities in their areas. The Oil Companies undertake Corporate Social Responsibility (CSR) initiatives to support service delivery in health, education and enterprise development, among others in the communities where oil and gas
activities are undertaken.

The Ministry plans to set up regional offices to ensure easy accessibility for the communities.

21. How and when will licensing of new acreage for exploration be undertaken?

The NOGP provides for efficiency in licensing through competitive bidding. The Petroleum (Exploration, Development and Production) Act, 2013 provides for licensing of areas with the potential for petroleum production in the country to be undertaken through open, transparent and competitive bidding.

Less than 10% of the Albertine Graben is licensed. The first competitive licensing round for some of the areas which are currently not licensed was announced by the Minister for Energy and Mineral Development on 24th February 2015.

This licensing round covers six blocks in the Albertine Graben which already have good data coverage. The six
blocks are; Ngassa (410 Km2) in Hoima District, Taitai & Karuka (565 Km2) in Buliisa District, Ngaji (895 Km2) in Rukungiri & Kanungu Districts, Mvule (344 Km2) in Moyo and Yumbe Districts together with Turaco (425 Km2) and Kanywantaba (344 Km2) in Ntoroko District.

Four companies, Niger Delta Petroleum Resources, Oranto Petroleum International Ltd, Waltersmith Petroman Oil Ltd and Armour Energy Ltd, qualified and are negotiating Production Sharing Agreements for three of the blocks (Ngassa, Turaco and Kanywataba) with Government before the exploration licenses are issued during 2017.

In addition, the Ministry of Energy and Mineral Development is preparing to undertake speculative geophysical surveys in the other areas of the country which have potential for petroleum production but with little or no data coverage yet.

Licensing for these areas with little or no data is expected to be undertaken subsequently.

22. The Albertine Graben is shared with Democratic Republic of Congo (DRC); what strategies are in place to ensure harmonised development?

The Governments of Uganda and DRC (then Zaire) signed an agreement of cooperation in 1990, to allow for joint exploration and exploitation of resources across the border by either country.

An addendum to the agreement was signed in 2007 to provide for how any fields falling across the border would be shared in line with the principle of unitization.

This agreement allows establishment of the percentage of the field in each country and thereby determine each country’s share at the time of production. The two Governments have held discussions on the ongoing work in the Albertine Graben, exchange of technical data and visits to the Albertine Graben to understand the exploration work, among others.

It is however important to note that the discoveries made in Uganda to date are not on the common border with DRC. The Governments of the two countries continue to have regular dialogue to ensure harmonious development
of the resources on either side of the border.

Source: Directorate Of Petroleum