State of Uganda’s Tilenga Oil and Gas Project

Article By Magnus Uju Amajirionwu, PhD
Professor of Environment & Sustainable Development
Coordinator, EMBA Environmental Management Programme

 

In 2017, the World Bank described Uganda as the current hottest inland exploration frontier in the world and the country to watch in the oil and gas space, due to the commercial discovery of an estimated 6.5 billion barrels of oil, 1.4 billion of which are recoverable. In September 2018, it was reported that the Uganda National Oil Company has signed a memorandum of understanding with the China National Offshore Oil Corporation to jointly explore oil in the Albertine oil region. The national oil company is tasked with managing Uganda’s commercial interests in the oil and gas industry. It was incorporated in 2015 under the Companies Act and is owned by the government through the ministries of energy and finance with a 51% and 49% shareholding, respectively.

Against this backdrop, the major players in the Oil and Gas market are Total E & P Uganda, Tullow Uganda Operations Pty Limited and China National Offshore Oil Corporation (CNOOC) who are all holders of production licences issued in respect of six (6) exploration blocks (the Blocks) in Albertine Graben (located in the western arm of the Great East African Rift, which they operate under the terms of a joint venture in accordance with a Joint Operating Agreement.

Environmental and Social Impact Assessment

The ESIA Report for the Tilenga Project has been prepared in accordance with the National Environment Act Cap 153, and Environmental Impact Assessment Regulations (EIA), 1998. The development of the ESIA Strategy for the Project was undertaken following discussions between the Project Proponents and the key Ugandan Regulators including National Environment Management Authority (NEMA) and Ministry of Energy and Mineral Development (MEMD). During the life of the Project, the Project Proponents will continually engage with relevant regulatory bodies including NEMA, the Petroleum Authority of Uganda (PAU), Uganda Wildlife Authority (UWA), the Directorate of Water Resource Management (DWRM) and others as necessary.

The ESIA systematically reviewed the potential effects of the Project on the existing environmental, social and ecological sensitive receptors. The impact assessment covered the entire life of the Project, including four individual phases including Site Preparation and Enabling Works, Construction and Pre-Commissioning, Commissioning and Operations and Decommissioning. The assessment was undertaken in accordance with the Ugandan EIA Regulations, 1998 (Ref. 2), and the IFC PSs, 2012 (Ref. 3). Potential short term and long term, direct and indirect as well as cumulative impacts were identified using standard assessment methodology and subsequently additional mitigation measures and enhancement controls were identified to try and help ensure that any negative impacts are minimised and reduced to a level which is acceptable. For any beneficial impacts identified, ways to further enhance and improve them were also explored.

The performance of all contractors will be assessed by a number of environmental inspections and audits that are designed to identify positive implementation and also missing elements or non-compliance with the Project Proponents’ HSE systems. The Environmental and Social Management Programme will detail the nature, frequency, and responsibility of inspections and audits.

Local Content Development

As Uganda joins the league of Africa’s oil-producing countries, local content development must be prioritised to ensure longer lasting positive impact. The Petroleum (Exploration, Development and Production) (National Content) Regulations 2016 came into force on 6th May 2016 and are intended to ensure participation of indigenous Ugandan entities in the oil and gas sector. In brief, the regulations require any licensee, contractor and sub-contractor to give priority to goods and services that are produced and available in Uganda and which are rendered by Ugandan citizens and companies during procurement. In addition, they are required to reserve the contracts for ring-fenced goods and services like security, foods and beverages, hotel accommodation for supply by Ugandan citizens and companies.

The Tilenga project, for example, will create more employment opportunities for the local workforce in Uganda. To be able to take advantage of these opportunities, the Tilenga project promoters have committed to the development of a more educated and skilled workforce through training and skills development for affected communities and project workers. Uganda has put in place a requirement for local content through the Workforce Skills Development Strategy and Plan for the Oil and Gas Sub Sector and the establishment of the National Suppliers Database. A plan for compliance should be developed for each company to enable a sensible transition.

Conclusion

The development of partnerships between the oil and gas operators, government organisations and private companies is critical to the success of the project. Most importantly, the adoption of Local Content Development Programme (LCDP) in the Uganda oil and gas industry must be a strategy to integrate and increase the participation of Ugandan businesses in the oil and gas supply chain. It must provide a framework by which the procurement of locally produced goods and services are progressively increased both in value and content. Local value creation must form the bedrock of Uganda’s LCDP. Evidence from other climes shows that value addition is a more important contribution of the oil and gas sector than its direct contribution to economic growth.

 

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