MINISTRY OF ENERGY AND MINERAL DEVELOPMENT COMMERCIALISATION OF UGANDA S OIL AND GAS SECTOR: REFINERY AND ATTENDANT INFRASTRUCTURE DEVELOPMENT Dr. Stephen Robert Isabalija PERMANENT SECRETARY 13 th -15 th March, 2017 ARA Week at the Westin Grand Hotel, Cape Town, South Africa 1
PRESENTATION OUTLINE Introduction The Oil and Gas Sector in Uganda Policy, Legal and Institutional Framework Refinery development in Uganda Pipeline Development Investment opportunities
3 1. Introduction 1.1 Mandate The Constitution vests ownership of all minerals and petroleum (oil and gas) resources in the Government on behalf of the Republic of Uganda. The mandate of the Ministry of Energy and Mineral Development (MEMD) is "To Establish, promote the Development, Strategically Manage and Safeguard the Rational and Sustainable Exploitation and Utilization of Energy, Petroleum and Mineral Resources for Social and Economic Development
4 Introduction.ctd
2. Policy, Legal and Institutional Framework 2.1 Institutional framework MINISTRY OF ENERGY (DIRECTORATE OF PETROLEUM) Policy and Licensing MINISTRY OF ENERGY AND MINERAL DEVELOPMENT (PEPD) Policy, Licensing, Regulation, Commercial NATIONAL OIL COMPANY Commercial and Business interest of the State PETROLEUM AUTHORITY Regulation of the oil and gas sector
The Oil and Gas Sub-sector in Uganda 2.2 Policy and Legal Framework POLICY LAWS REGULATIONS AGREEMENTS POLICY The National Oil and Gas Policy (2008) LAWS The Petroleum (Exploration, Development and Production) Act, 2013 Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013 Petroleum Supply Act, 2003 Public Finance Management Act 2015 that handles petroleum revenue management REGULATIONS The Petroleum (EDP) Regulations 2015 The Petroleum (EDP)(Health, Safety & Environment)Rg ns 2016 The Petroleum (EDP) (National Content) Regulations 2016 The Petroleum (EDP) (Metering) Regulations 2016 The Petroleum (RCTMS) Regulations 2016. The Petroleum (RCTMS) (National Content) Regulations, 2016 The Petroleum (RCTMS)(Health, Safety & Environment) R ns, 2016 The Petroleum Supply (General) Regulations 2009 Petroleum (Marking and quality control) regulations, 2009 AGREEMENTS Model Production Sharing Agreement and Joint Operation Agreement
3. Refinery development in Uganda 3.1 Introduction Following the discovery of commercially viable resources, a feasibility study was conducted to assess the most viable option to add value to the oil and gas resources. The study established that the refinery was commercially viable. It provides for the capacity, configuration, location, project cost estimates among others. Regional consumption is about 200,000bbl/day with a growth rate of 7%. Reduced security of supply and high import bill of about 1 billion USD annually.
3. Refinery development in Uganda Introduction cont The EAC strategy for development of regional refineries was adopted by Partner States in 2008. It recommended that a refinery should be developed in Uganda. Memorandum of Understanding (MoU) with the Licensed Upstream Companies on Commercialization plan signed in 2014. It highlights three commercialization options; i. Crude to power ii. Establishment of the refinery iii. Crude oil export The MoU provides that the refinery has to first right of call on the produced crude oil. Government plans to develop a 60,000 bbls/day refinery with an option of being developed in either single or two phases of 30,000 bbls/day each
CONSUMPTION BARRELS PER DAY 3. Refinery development in Uganda THE REPUBLIC OF U GANDA 3.2: Demand for Uganda Petroleum Products consumption trend since 2012 Year Quantity (barrels per day) 2012 23,535.39 2013 25,081.48 2014 27,102.08 2015 30,324.33 2016 31,826.75 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 Petroleum Products consumption in Uganda The demand for Petroleum products has been increasing gradually. This implies readily available market for the domestic industry 10,000.00 5,000.00 - Trend of consumption of petroleum products 2012 2013 2014 2015 2016 YEARS
3.Refinery development in Uganda 3.3: Target Markets for Ugandan Refinery Ugandan Refinery will target the East African regional market in two zones: Primary Market: Ugandan market Rwanda Burundi Eastern DRC South Sudan Secondary Market: Western Kenya Northern Tanzania
3.Refinery development in Uganda 3.4 The project Components include; A 60,000 barrels per day refinery A 12 inch diameter, 211 km refined products pipeline from Hoima to Buloba near Kampala. A bulk storage terminal at Buloba
3. Refinery development in Uganda 3.5: Project Progress The Government is seeking a refinery investor. A competitive process was conducted in 2013 and terminated in June 2016. Since then the Government is promoting the refinery and had engagements with over 40 Companies that have expressed interest in project. Benchmarking on the market sounding, the Ministry is in the searching for a Lead Investor who will; design, build, provide 100% finance and operate the refinery Assume the crude supply, refining and marketing of product risks: a merchant type of a refinery Repayment of investment costs to be made from project revenues.
3. Refinery development in Uganda 3.6: Investment Mode Capital Costs ~ USD 3.5 Billion Lead Investor Design, Build, Finance and Operate (DBFO) Ownership Private-Public Partnership (60 : 40) Project Borrower Special Purpose Vehicle (Refinery Company) EAC Shareholding Offered 8% of Public Shares each
3. Refinery development in Uganda 3.7 Actions towards supporting refinery development 8 Production Licenses for major oil fields were issued in August 2016 to ensure production of adequate crude oil. Infrastructure to support the refinery developed; Major roads to project site and oil fields have been upgraded or are being upgraded. Land for refinery and associated infrastructure acquired. Masterplan for development of an Industrial Park at the project site is being conducted. Development of an airport near project site to ease transportation of equipment and labour.
3. Refinery development in Uganda Acquisition of right of way for 211 km, 12 inch diameter refined products pipeline from Hoima to Buloba is on schedule with; Resettlement Action Plan (RAP) study completed Implementation of RAP is on-going. Route survey and Environmental Baseline Study completed. Land for products Storage terminal at Buloba has been acquired.
3. Refinery development in Uganda 3.8: Implementation schedule Negotiation and endorsement of Project Agreements Project Framework Agreement Implementation Agreement Shareholders Agreement Pre-FID 4 months Engineering and design studies Environmental Impact Assessment (EIA) 12 months from signing of Agreements Final Investment Decision (FID) Engineering, Procurement and Construction Commissioning of first phase Post-FID 3 years 16
3. Refinery development in Uganda 3.8: Project Challenges The need for a complex refinery and the attendant cost of financing the project The persistent low oil price causing anxiety whether crude oil development Final Investment Decision will be taken. Delayed decision on the crude oil export pipeline route. Availability of financing for Government participation in petroleum infrastructure investments. Public expectations and anxiety 17
4.0: Pipeline Development 4.1 East African Crude Oil Pipeline Project The East African Crude Oil Pipeline (EACOP) will be developed to transport Uganda's crude oil from oil fields in Uganda to Tanga port in Tanzania in order to access the international market. EACOP project includes the construction of: a 1445 km long 24 inch insulated and buried pipeline 6 pumping stations, 2 pressure reduction station and a marine export terminal at Tanga
4.0: Pipeline Development,,,ctd Front End Engineering Design (FEED) Commenced in January 2017 and is expected to be completed by end of August 2017. The study is being undertaken by Gulf Interstate Engineering (GIE) from Houston USA IGA Negotiation between Governments of Uganda and Tanzania is ongoing and is expected to be completed in April 2017 Environmental Social Impact Assessment (ESIA) studies have commenced in Uganda and Tanzania. The EACOP to serve as regional infrastructure to deliver crude oil from Uganda and other oil fields in the region
5.0: Investment Opportunities Service provision and contracts in the fields of Engineering, Procurement & Construction in taking forward the development of the different infrastructure; Development of a Petrochemical Industry; Logistical services; Waste management; Development of Hoima Refinery airport to facilitate logistics during and after the refinery construction.
Thank You Further Information; PERMANENT SECRETARY MINISTRY OF ENERGY AND MINERAL DEVELOPMENT psmemd@energy.go.ug/mpd@petroleum.go.ug www.petroleum.go.ug 21