‘We are open for business’ – Uganda team lobbies energy investors

CAPE TOWN- Uganda’s delegation put up a spirited lobby for investments in the country’s energy sector on the last day of the Africa Energy Week in Cape Town, South Africa, reinforcing the presence of a conducive and predictable regulatory regime to protect the millions of dollars needed in the oil and gas, mining and electricity industries.

While calling on investors to come and do business, Irene Batebe, the permanent secretary in the ministry of Energy, who led the team, said Uganda is not only preparing to launch a new oil licensing round in June 2024, but it has also opened up space within the transmission segment of the electricity supply industry for private capital.

In doing all this, Batebe added that the long-term view remains to go green with the promotion of e-mobility through the exploitation of the country’s critical minerals such as rare earths elements.

“Without a doubt, we must exploit our petroleum to be able to equally invest in these renewable options. And in terms of the long-term view, we see electric mobility also coming into play,” she said.

She added that: “We already are running a strategy that we are finalizing to see how we also deploy electric mobility as part of our energy transition plan. And we are very keen, therefore, to also see investment in our critical minerals.”

The Africa Energy Week is an annual event that gathers investors from all over the world with the focus to invest in Africa’s energy sector.

The event, which is usually held a few weeks before the global climate change summits, is meant to rally investors not to give up on Africa’s ambitions to exploit all sources of energy in order to uplift its population. Nearly 600 million Africans are estimated not to have access to electricity.

In order to exploit its 6 billion barrels of discovered oil, of which 1.4 billion is said to be recoverable, Uganda is developing a $10 billion – $20 billion oil project – a crude oil pipeline and a refinery – that has come under criticism from environmentalists over its purported risks to the environment.

The crude oil pipeline is expected to ship out 230,000 barrels of oil per day at peak from Hoima to the Tanzania port of Tanga when it is commissioned within its scheduled timeline of the first quarter of 2025. It will be the world’s longest heated underground crude oil pipeline, running for 1,445km. Also, an oil refinery with a capacity of 60,000 barrels of oil is expected to be commissioned in 2027.

The debt component will take the larger share of the financing needs for the pipeline and refinery. Uganda’s delegation said it was committed to developing its oil project using best practices.

“We are prudent operators working and riding on the back of very prudent international oil companies, and we’ll do everything possible to ensure that it delivers the much-anticipated value, while at the same time protecting biodiversity,” Proscovia Nabbanja, the chief executive officer of the Uganda National Oil Company, said.

Ali Ssekatawa, the director Legal and Corporate Affairs, the upstream and midstream laws that Uganda introduced between 2013 and 2016, which also take in the environment aspect, were modelled around international best practices. Already four rigs have been deployed on both the Tilenga, which is operated by France’s TotalEnergies, and the Kingfisher, operated by China’s CNOOC, sites, with the drilling of the oil underway.

Also, above ground installation works to mobilise staff and equipment for the East African Crude Oil pipeline have already started. All major contracts for the EACOP have been awarded, while land acquisition for the entire route of the pipeline is almost complete. When it comes to the refinery, Uganda has already selected a South African firm – COEGA – to open up the industrial park.

On top of its participating interest in the EACOP, the Tilenga and Kingfisher projects, UNOC is also developing petroleum storage facilities as part of the oil refinery project. UNOC is building a $1 billion equity investment, which remains far below the nearly $15 billion it needs to execute these projects comfortably.

The return on investment for some of these projects, Nabbanja said, should excite any investor.

“When you look at all the projects, for every dollar we are investing, we are returning about 10 dollars,” she said.

And on the oil refinery, Nabbanja said that they have “done a macroeconomic assessment of the project, and you can imagine the level of returns that we are going to get from that project… in excess of 20 per cent.”

She added: “at the same time, the metrics around the balance of payment, the national capital formation, and so many other metrics that will come with it, are quite enormous.”

Aggrey Ashaba, who sits on the board of the Private Sector Foundation of Uganda, and is already a player in the oil and gas sector, said investors have very little to worry about.

“In terms of regulation, and in terms of the policy, and the opportunities, they are basically hand-in-glove with the aspirations of the private sector. So, we are not at variance between what they (government) are trying to regulate and what the private sector would like to do,” he said.

Job Kahigwa, the managing director of Rohi Investments, a local company that has undertaken preparations works in the oil fields of Tilenga and Kingfisher, said investors need to look at joint ventures to work with local players.

“We are looking at a working capital performance guarantee package of up to $30 million for our projects. And this is way beyond our capacity to be able to be bankable as a local entity with our small profit and loss books of accounts,” he said.

He added: “So, the message here is how are we able to raise $30 million, and execute these projects that we have right now?”