Energy in Uganda - Oil and Natural Gas

Oil and Natural Gas

Uganda is highly vulnerable to oil price shocks as it imports almost all of its 7,000 bbl/d (1,100 m3/d) of oil (2004 figure) from the Kenyan refinery in Mombasa, which in turn imports crude oil from abroad. In 1995, the governments of Kenya and Uganda agreed to investigate the possibility of extending the Mombasa–Eldoret pipeline a further 320 km to Kampala. According to the Managing Director of the Kenya Pipeline Company, the $97 million pipeline would provide 1.2 million cubic meters in its first year of operation. A bio-code programme was implemented in 2000, which allows authorities to determine if an end user is using officially imported petroleum products. The government reported a drop in diluted and adulterated samples taken from gas stations from 20% in December 2000 to 1.5% in September 2001.

By the early 2000s, Uganda was seeking domestic petroleum reserves in response to rising oil prices. In September 2002, Heritage Oil announced the first exploratory well, in Block 3, located in the Semiliki Valley in western Uganda, in the hopes of confirming seismic studies showing 1.2 billion barrels (190,000,000 m3) of oil in the basin. In June 2006, Hardman Resources of Australia discovered oil sands at Waranga 1, Waranga 2 and Mputa. President Yoweri Museveni announced that he expected production of 6,000 bbl/d (950 m3/d) to 10,000 bbl/d (1,600 m3/d) by 2009. He further announced that a mini-refinery would be set up to produce diesel, kerosene and heavy fuel oil.

In July 2007, Heritage Oil, one of several companies prospecting around Lake Albert raised its estimate for the Kingfisher well (block 3A) in Bunyoro, Hoima District, stating they thought it bigger than 600 million barrels (95,000,000 m3) of crude. Heritage's partner, London-based Tullow Oil, which had bought Hardman Resources, was more guarded, but stated their confidence that the Albertine Basin as a whole contained over one billion barrels. The Kingfisher-1 well flowed 13,893 barrels per day (2,208.8 m3/d) of 30-32 API oil. This news came on the heels of Tullow's July 11, 2007 report that the Nzizi 2 appraisal well confirmed the presence of 14 million cubic feet (400,000 m3) per day of natural gas. Heritage in a report to its partners talked of Ugandan reserves of 2.4 billion barrels (380,000,000 m3) worth $7 billion as the "most exciting new play in sub-Saharan Africa in the past decade." However, development will require a 750 miles (1,210 km) pipeline to the coast, which will need $80 oil to justify.

Excitement was dampened by the deaths on August 3, 2007 of a Congolese soldier and Heritage geologist in a clash on the lake. Both the Democratic Republic of the Congo (DRC) and Uganda moved troops to the border. This followed the detention by the DRC of four Ugandan soldiers it claimed to be on their side of the border, and preceded the murder of three Ugandan villagers by an incursion of the Democratic Forces for the Liberation of Rwanda, a Hutu group descended from those responsible for the 1994 genocide. Relations have been tense since the discovery of oil, as both countries seek to clarify the border delineation on the lake in their favor, in particular the ownership of small Rukwanzi Island. Ugandan foreign minister Sam Kutesa made an emergency visit to Kinshasa in an attempt to smooth tensions. The Economist magazine, noting that the DRC has assigned exploration blocks on its side of the border, proposed that the situation should sort itself amicably: Uganda needs a stable and secure border in order to attract foreign investment developing the oil reserves, while the cost of transporting the oil to the DRC's sole port at Matadi is so prohibitive that the Congolese government is nearly obliged to seek pipeline access through Uganda.