By Boniswa Babazile, East Africa Correspondent, in Lusaka
The chances of final investment decisions (FIDs) on full blown crude oil development, in Kenya and Uganda, are still quite a stretch, despite all the optimism.
It still might happen that neither of the two FIDs is taken in 2019 and first (commercial scale) oil from either may not reach the market until 2024.
The projects are the two largest onshore African oil developments, with the Ugandan project expected to peak at 210,000BOPD and Kenyan development expected to plateau around 100,000BOPD.
Operators in Kenya are forecasting a late 2019 FID, “contingent on key Government of Kenya deliverables”.
Tullow Oil, the lead operator in that country, notes that a late 2019 FID “remains an ambitious target”. The company is finalising its FEED studies for both the upstream and midstream, and both the upstream and midstream Environmental Studies (ESIAs) “remain on track for submission to the National Environmental Management Agency at the end of the second quarter”.
The Government of Kenya, via the National Land Commission, has gazetted the land required for the upstream development in Turkana and, so far, approximately two-thirds of the pipeline. But even that fact remains contentious, as local leaders in the oil rich communities say that there wasn’t enough consultation. Tullow says, however, that “discussions with Government regarding key commercial agreements are making steady progress”.
In Uganda, the latest update is that “FID is planned for the second half of 2019” as the approval of the 22% stake farm down by Tullow is being finalised with the government. Negotiating the withholding tax around the farm down has taken all of 21 months. While technical and operational issues on the upstream and midstream are supposedly making progress, the commercial aspect remains the bottleneck.
Negotiations between the governments of Uganda and Tanzania, as well as between the companies TOTAL, CNOOC, and Tullow and the two governments have proven so tasking that FID date was shifted from first half 2019 to second half 2019 and looks likely to be shifted to 1st Quarter 2020. The Ugandan project has dragged from the get go, even before commerciality was declared in 2013.
This article was initially published in the May 2019 edition of the Africa Oil+Gas Report.