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Discoveries put Uganda on the path to becoming an oil exporter

Interview - December 19, 2014

Hon. Irene Muloni, Minister of Energy and Minerals Development of Uganda, talks about her country´s vast mineral wealth, which goes far beyond oil, a resource she says could transform the Ugandan economy.


How much petroleum has been discovered in Uganda and when do you expect to see the first production?

We have confirmed over 3.5 billion barrels of oil in place, out of which we expect to recover between 1.2 billion to 1.7 billion barrels of oil. Three companies are currently licensed to undertake petroleum exploration, development and production, and these are: China National Oil Offshore Corporation (CNOOC), Total E&P, and Tullow Oil. We expect to see the first oil production between 2016 and 2017 for power generation. The huge hydro power projects will take up to five years to be completed and therefore should electricity demand outstrip the current capacity before then, we can use some of the crude oil for power generation as an interim measure. We have agreed on the commercialization plan with the licensed companies, which includes crude oil for power generation in the interim.

What is the next step in terms of commercialization?

The next step is the development of a refinery in the country. We intend to construct a refinery with a capacity for 60,000 barrels a day. We will do this in phases, starting with 30,000 barrels per day. This will ensure that the refinery comes on stream quicker and will enable the country to build capacity in aspects of refining earlier, before expansion to 60,000 barrels per day. The first phase of the refinery is expected to be up and running by end of 2017.

We understand that there is a third destination for the crude oil.

The third destination is export of crude oil to the international market.

What are your general expectations for these projects?

A lot of work is being undertaken to develop the required infrastructure as the country prepares to go into commercial production. These activities are expected to generate many investment opportunities in terms of logistics, equipment, materials, EPC contracts, consultancies, among others for investors.

What sort of preparations have you done on the legislative side of things?

We have enacted two new laws for the upstream and midstream sectors. We already have existing laws for the downstream sector. We have a robust legal, regulatory, and institutional framework for the petroleum sector which provides a predictable environment for investment.

In line with the new laws, we are putting in place new institutions, namely a Petroleum Authority to regulate the sector, and a National Oil Company (NOC) to do business on the behalf of government. We expect the appointment of Board Members soon to take forward the establishment of these new institutions.

How would you evaluate the success factor in drilling?

Uganda has an unprecedented drilling success rate of over 85%, which is one of the highest in the world. In addition, the cost of finding oil in Uganda is among the lowest in the world, at less than $1 per barrel. This, coupled with the drilling success rate, attests to the attractiveness of investing in Uganda’s oil and gas sector.

Things look bright for the Ugandan oil sector.

As a country, we are really looking forward to developing this resource (petroleum) because it will contribute to transforming this economy into a first world economy.

What are your thoughts on the economic inclusiveness that will bring the rational use of the oil resources?

We want all Ugandans to benefit from this resource because it belongs to us all. As such, we want to plough the revenues from this resource into development of infrastructure that supports other productive sectors of the economy, including roads, railway, electricity, airport, water and sanitation, education, health, services, and modernizing agriculture. This way, we will ensure that all Ugandans benefit from their natural resource. We want to transform the “black gold” into the “green gold” for our country.

This would lay the foundation on which Ugandans can build their capacity to create wealth. For instance, through setting up small-scale industries in the rural areas that can add value to what we are producing, as an agricultural economy we create more jobs and increase per capita income. This will enable us to shift to a middle-income, and then to a high income country.

What can you tell us about the Ugandan mining sector?

As I have said, Uganda is very blessed. It has plenty of minerals. When you look at the minerals map of this country, the minerals that are here are amazing. We need to tap into this resource, add value to it, and generate wealth for this country. This should help support the transformation process.

In terms of mineral resources, we have already confirmed the occurrence of various minerals (both metallic and industrial). Under metallic minerals, we have beryl, bismuth, chromite, cobalt, copper, gold, iron ore, lead, lithium, manganese, columbite-tantalite or coltan, tin, tungsten or wolfram, and so on. Our industrial minerals include asbestos, phosphates, clay, diatomite, feldspar, limestone, granite, marble, mica, rock salt, silica sand, talc, vermiculite, graphite, kaolin, kyanite, rare earth, uranium, and so on. It is also a known fact that Uganda is extremely rich when it comes to gold, as well.

A lot of work is being done. We have conducted airborne magnetic surveys in 80% of this country. By being able to identify things better, we are in a better position for investors to come, conduct explorations and add value.
Further investigations have revealed a wealth of mineral potential in this country.

Certain progress has been made with certain minerals.

Yes, we have copper. This is in Kilembe. There is an investor who is already developing the place. It has an estimated capacity of 6 million tonnes, with a grade of 1.77%. We also have about 5.5 million tonnes of cobalt, with an estimated grade of 0.17%. Beryl and chromite are still under investigation.

If you look at iron ore, we have about 300 million tonnes of proven reserves. The potential for rare earth, on the other hand, has a potential of about 74 million tonnes, with a grade of 0.32%.

We have about three billion tonnes of aluminous clays with a grade of about 23% REE and 27% Alumina. Regarding phosphates, we have about 300 million tonnes, with a grade of 13.1%. We already have an investor on the ground.

We have 55 million tonnes of vermiculite—one of the biggest in the world. There is already an investor for this particular area, but we need value-addition.

We have about 3 million tonnes of kaolin, 2 million tonnes of gypsum, 22 million tonnes of salt, 2 million tonnes of really high quality glass sand (at 99.95%), as well as silicon oxide (with a grade of 99.9%).

For limestone, we have about 27 million tonnes, with 15 million tonnes in Hima and 12 million tonnes in Dura. Under this, we have two cement factories—one in the west and another in the east.

Gold occurs in various parts of this country. Measured and indicated reserves have been established at Busia (SE Uganda), Mashonga, Kitaka, Kampono (SW Uganda) and Kisita and Kamalenge (Central Uganda). Indeed, a goodamount of work has gone into this area already. We need to add value before exporting it.

Another area of investment could be the dimension stones for the construction of tiles. We have about 300 million tonnes of it. There are just so many to highlight.

How do you intend to export this to the world?

The first step is to let the world know that we have these reserves. The next step is to attract those interested investors. They set up machinery to add value. It is going to be a win-win situation.

You see, the return on investment (ROI) here is really high at about 18%. That is no small feat. You cannot find that kind of ROI just anywhere. Depending on how you do the investment, you are bound to get this amount or more.