Industry news

Oil and gas on steady path to revamp economic growth

Government is pegging quick fix to current fiscal downturn caused by the COVID 19 pandemic to the commercialisation of oil and gas sector. Joint Venture companies reached a Final Investment Decision (FID) in February, shortly after the full re-opening of the economy.

While delivering 2022/2023 budget speech, finance minister Matia Kasaija told the nation that, the economy is gradually rebounding as seen in the increasing values of imported goods by the private sector. The values rose to $6.5million in April 2022 up from $5million in April the previous year.
“This increase is attributed largely to investments in the oil and gas sector,” Mr. Kasaija said. “For the same reason, foreign direct investment (FDI) has rebounded strongly…” he added.

Ministry of finance data shows that $1.36 billion was flown into the country in April 2022 up from $892million in April 2021. In the coming financial year, government has allocated UShs 904.1 billion to boost both the mining and oil and gas sector activities.
Uganda experienced two prolonged lockdown- a strategy employed to contain spread of the COVID 19 pandemic. This caused economic activities to slow down with some coming to a complete halt. This development has resulted into reversal in economic growth current at 4.6%, loss of jobs, poverty and rising inflation.

Cost of living has shot-up -fuel pump prices have reached unprecedented high with a liter of petrol trading at about six thousand Uganda shillings up from three thousand four hundred shillings in pre-pandemic days. Cooking gas is trading at UShs 138,000 for a 12kg up from UShs 115,000 in April. Worse still, prices of all essential commodities have also risen.
Medium/long term solution
However, the oil and gas sector is expected to generate the much needed government revenues. Industry experts estimate that the government could earn $2billion annually from the sector. In addition, the sector is expected to create employment -skilled and unskilled- while a vast majority is expected to benefit indirectly by positioning themselves in various undertakings to earn their shares.
For example, it is hoped that East African Crude Oil Pipeline (EACOP) will significantly contribute to the increase of foreign direct investment per year by over 60% for Tanzania and Uganda during the construction phase. Accordingly, it will unlock East Africa’s oil potential by attracting more investors.
EACOP is a 1,445km export pipeline that will transport Uganda’s crude oil from Kabaale, north-west of Kampala to Chongoleani peninsula, near Tanga port in Tanzania. The 24 inch diameter pipeline will export a flow rate of 216,000 barrel of crude per day.
In May 2017, Tanzania and Uganda signed the Inter-Governmental Agreement (IGA) which provides legal basis for the implementation of the EACOP project. Approximately, $3.5billion will be injected into this project.

“We have taken major steps to revive business activities. The construction of the EACOP is expected to commence in the coming financial year,” Kasaija said.
While Kasaija acknowledged that government has no control over external forces causing shocks to the economy, he promised that government will work within- by furthering development of projects like the refinery and boosting value addition capacities in the mineral sector, agro- industry and manufacturing.
Uganda has planned 60,000 barrels of oil per day refinery. The project cost is at $4.27 billion. Italian based Albertine Graben Refinery Consortium is the lead investor with 60% shares. Uganda holds 40% shares out of which, it is has offered EAC member countries to take up.

In an earlier interview, energy ministry permanent secretary explained that the refinery has been configured to produce petrol, diesel, kerosene jet fuel and other petrochemical products including fertilizers liquefied petroleum gas and heavy fuel oil. This is expected to save the over country $1 billion, the amount spent on petroleum product imports annually.
“The capacity of the Uganda National Oil Company (UNOC) to invest in oil and gas development has also been enhanced. While there have been negative campaigns against the development of EACOP, The government will develop Uganda’s oil and gas resources in responsible and sustainable for the benefit of all Ugandans,” Kasaija said.


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