Edward Sennoga, Second Lead Economist for the AfDB’s East African office said there is an opportunity for Uganda to earn from its newly found oil but time was running out.
The
Africa Development Bank has warned it is “a race with time” for Uganda to begin
pumping its oil out of the ground or risk future losses.
Edward
Sennoga, Second Lead Economist for the AfDB’s East African office said there is
an opportunity for Uganda to earn from its newly found oil but time was running
out.
“So we
are racing against time for Uganda. We need to harness this fossil fuel for short-term
energy security but time is not on our side,” said Edward Snnonga.
He was
one of the speakers at the launch of the African Development Bank’s Uganda
Country Focus Report 2023 at Hotel Africa in Kampala.
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In “So we are racing against time…….
Cue Out…something
that we need to keep on our radar”///
The
warning by Sennoga and other experts is based on the fear that the global shift
or transition to low-carbon economies or the energy transition could affect the
demand for oil globally.
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In “ We also need to…..
Cue Out…….
Out there about”///
According to the country focus report by the African Development Bank, Uganda's economy is expected to continue to expand over the medium term, with 6.5% and
6.7% growth in 2023 and 2024.
It predicts that Oil companies will ramp up investments as they target 2025 for production and exports. Higher growth and investment will sustain imports and an elevated current account deficit. Price pressures are moderating, with average inflation declining to 6-6.5% over the medium term.
Some
experts have indicated that Uganda should have begun pumping its oil before 2030
or 2040 when the world shifts to electric vehicles.
The Energy transition bringing new pressures to bear on the oil and gas
sector from stakeholders and regulators.
In its net zero by 2050 road map, the
International Energy Agency (IEA) highlighted that the global energy sector
needs to achieve a significant reduction in the use of hydrocarbons by
2040—including the phasing out of all unabated coal and oil power plants—in
order to reach net zero by 2050.
Uganda
is currently constructing infrastructure valued at $10 billion for the Tilenga
projects by TotalEnergies and the King Fisher project owned by CNOOC.
The construction
of additional infrastructure like the crude oil refinery valued at about $4 Billion
and the East African Crude oil pipeline (EACOP) valued at $3.5 billion is yet
to take off.
Sennoga
warned that there is a challenge of potentially stranded assets if the country
does not move forward with its oil and gas activities to production.
“So we need to bring all that into focus. The good thing
is that Uganda has been investing for quite some time in building institutions
that can help that advancement” said Sennonga “So again that is important for
us to keep on the radar. We don’t have all the time. There is going to be a
time when demand for oil is going to be dipping,” he added.
So according to Sennonga, this is Uganda’s time to
take advantage of oil and gas resources but also invest in productivity in other
sectors to expand productivity in other sectors.
In January 2022, a nonprofit financial think tank,
the Carbon Tracker Initiative tracking how the assets in the oil and gas
sector were likely to be impacted by the energy transition estimated that up to
one trillion dollars in assets could be stranded globally.
Why the Delays?
Uganda had its oil out of the
ground nearly 18 years after commercial recoverable of was discovered in the
Albertine region. The county has also been shifting its projected production
timeline from 2020 to the second or third quarter of 2025.
Part of the delay was the failure
of the government to conclude major agreements with the oil and gas companies.
That delayed the taking of the Final Investment Decision (FID).
There had
been a disagreement over disparity in the crude oil pipeline tariffs during the
negotiation of the host government agreement (HGA) between Uganda and joint
venture partners Total E&P, Tullow oil Uganda and China National Offshore
Oil Company, and the Tanzanian government.
The FID was finally taken in
February 2022 paving to major construction works at Tilenga and King Fisher projects
in Bulisa, Nwoya, and Kikuube districts. Drilling or spudding works are ongoing
at the two projects.
The developments suffered another
setback at the end of June when an agreement with the American-led
venture that was to build and operate the 60,000-barrel crude oil refinery
expired.
The government had yet to find a replacement for the
Albertine Graben Energy Consortium (AGEC) by the time of filing this report.
Amidst the long waits and delays, the prospects for
the global oil industry have keen on changing leading to questions about the
economic viability of oil and gas projects in Uganda.
