African Economist Urges Uganda To Fast Track Oil and Gas

Kampala, Uganda | THE BLACK EXAMINER | The Africa Development Bank has issued a stark warning to Uganda, emphasizing the urgency of commencing oil extraction to avoid potential future losses. Edward Sennoga, Second Lead Economist at the AfDB’s East African office, stressed the need for Uganda to capitalize on its newfound oil resources swiftly.

Speaking at the launch of the African Development Bank’s Uganda Country Focus Report 2023 in Kampala, Sennoga highlighted the time-sensitive nature of the situation. The concern shared by Sennoga and other experts stems from the global transition to low-carbon economies and the energy transition, which could diminish global oil demand.

Some experts suggest that Uganda should have initiated oil production before 2030 or 2040 when electric vehicles are expected to dominate the market. The energy transition is also introducing new challenges for the oil and gas sector, with increased pressure from stakeholders and regulators.

The International Energy Agency (IEA) outlined in its net-zero roadmap that the global energy sector must significantly reduce hydrocarbon usage by 2040, including phasing out unabated coal and oil power plants, to achieve net-zero emissions by 2050.

Currently, Uganda is investing in approximately $10 billion worth of infrastructure for the Tilenga projects by TotalEnergies and the King Fisher project owned by CNOOC. However, the construction of additional infrastructure, such as the $4 billion crude oil refinery and the $3.5 billion East African Crude Oil Pipeline (EACOP), has not yet begun.

Sennoga warned of the potential for stranded assets if Uganda does not progress with its oil and gas activities. He emphasized the importance of leveraging this opportunity while investing in other sectors to boost productivity.

Uganda has faced considerable delays in its oil production journey, with the oil remaining untapped for nearly 18 years after commercial recoverable reserves were discovered in the Albertine region. Delays stemmed from disagreements and negotiations over crude oil pipeline tariffs in host government agreements, leading to a protracted Final Investment Decision (FID) process.

The FID was eventually made in February 2022, enabling major construction works to commence at the Tilenga and King Fisher projects. However, further setbacks occurred when an agreement with an American-led consortium for the construction and operation of a 60,000-barrel crude oil refinery expired.

These delays, coupled with shifting dynamics in the global oil industry, have raised questions about the economic viability of oil and gas projects in Uganda.

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