April 30, 2021 Read More →

Huge Ugandan oil deposits face development risks from transition

S&P Global Platts ($):

Uganda’s long-delayed maiden oil project took a vital step to becoming more than a pipe dream this month but risks still hang over hopes of new export flows from East Africa.

France’s Total inked the final pipeline deals needed to unlock its multibillion-dollar Lake Albert oil discoveries, and first oil is now expected to flow by early 2025.

The deal concludes more than a decade of wrangling over plans to develop Uganda’s oil, which will transform the landlocked country into East Africa’s second oil exporter behind South Sudan, unless Kenya gets there first.

Major discoveries in 2006 put Uganda on the global oil map with the largest onshore discoveries in sub-Saharan Africa at 1.7 billion barrels of recoverable oil. Many believe much more is yet to find.

But rumbling disputes with the Ugandan government over tax, contractual terms and ownership changes have hobbled progress on the find. Political arbitrage with neighboring Tanzania and Kenya over an export route for the development only added to the delays.

But perhaps the biggest threat to finally bringing Uganda’s oil to market now lies with the growing global push back against fossil fuels as the clean energy transition gathers pace. Uncertainty over future oil demand and oil prices in the wake of the pandemic has already accelerated the threat to financing major new upstream projects.

As global leaders and green groups jostle to control the climate narrative ahead of the COP 26 climate talks in Glasgow this year, Uganda’s oil has attracted a surge in attention from environmental groups.

[Robert Perkins]

More: Fuel for Thought: Uganda’s struggle to pump its first oil may be still far from over

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