Kingfisher Oil Project to Earn Uganda $6.7 billion – Rubondo
The Executive Director of the Petroleum Authority of Uganda (PAU), Ernest Rubondo has said that Kingfisher oil project will bring 6.9 billion dollars to Uganda government coffers.
Kingfisher project operated by China National Offshore Oil Company (CNOOC) is among the projects which Uganda is executing under its oil and gas sector. Other projects include; Tilenga project, the construction of the East African Crude Oil Pipeline (EACOP) and the Refinery.
Speaking at the commissioning of Kingfisher oil drilling rig in the Kingfisher oil field in Kikuube district on Tuesday, Rubondo said the investment in developing the Kingfisher oil field is expected to cost over 2 billion dollars which is expected to be spent over a period of 3 years.
“This is the amount that will be spent up to the time of production. When production commences, another 1.5 billion dollars will be spent over the 20 years when the field will be produced. This money will be spent on operation and maintainance of the field,” he said.
At the end of 2022, a total 1.7 billion dollars had been invested in the development of Kingfisher oil field.
About 580 million dollars is expected to be invested in the Kingfisher development project this year (2023), and a similar amount (580 million dollars) is expected to be invested in 2024.
“The costs which will be recovered when production starts are finally approved by the office of the Auditor General. The cost of producing oil from this Kingfisher oil field is estimated to be about 22 dollars per barrel, and this compares very well to the international average of about 30 dollars per barrel. The economics of Kingfisher oil field indicate that the project is economically viable at 35 dollars per barrel,” Rubondo said.
At the current oil price which is about 87 dollars per barrel, Rubondo said the Kingfisher oil project will account for about 15% of the total oil revenue which government expects to receive from its oil and gas resources.
“15% because the bigger production is expected to be from the Tilenga project operated by Total Energies. This will bring a total of 6.9 billion dollars to government coffers over the entire period of the project. This is averaging about 360 million dollars per year from this Kingfisher oil field. The numbers are more when you add up the amount that I expect from Tilenga project,” he said.
When Petroleum Authority of Uganda is regulating the work of oil companies in Uganda, it focuses on five key areas which include; management of petroleum resources, management of costs and economic analysis, management of petroleum data and information, health, safety and environment, and the participation of Ugandans.
Regarding resource management, the Kingfisher oil field is one of the 21 oil and gas fields which have been discovered in Uganda to date.
The oil field is among the 14 fields which the Minister of Energy and Mineral Development has granted permission for production of oil.
“That means that 7 of the oil and gas discoveries have not qualified to be granted production licenses by the Minister.”
The Kingfisher oil field is about 15 kilometres long and 3km wide.
The oil field extends about 3km into lake Albert.
The Kingfisher oil field is estimated to have a total of 560 million barrels of oil in place. Out of this, 190 million barrels of oil (33%) is expected to be produced over a period of 20 to 25 years.
The oil field is expected to have a maximum production of 40,000 barrels of oil per day for 5 years.
“After 5 years, the production of oil in Kingfisher will begin to decline. So, you will have less oil produced,” said Rubondo.
The field development plan approved by the Minister of Energy and Mineral Development, Ruth Nankabirwa provides that when production at Kingfisher oil field begins to decline, the company (CNOOC) will begin to produce from the three oil fields which are in the Kaisotonya area.
“Production from these three oil fields will enable to maintain the production of the Kingfisher project and the oil produced from those three oil fields in the Kaisotonya area will be transported by pipeline to a processing facility,” said Rubondo.
The drilling rig launched on Tuesday will be used to drill 27 production wells of the 31 wells on Kingfisher oil field.
Four of the 31 wells are already drilled because they were drilled for exploration and appraisal.
20 of the oil wells will be used to produce oil while 11 will be used to inject water into the reservoir.
The rig at Kingfisher oil field is so far the strongest rig ever used in Uganda.
“It is very strong and uses about 6 megawatts of power in operation. The rig has the capacity to drill up to 8km length.”
The wells to be drilled in the Kingfisher oil field will vary in depth: the shortest will be 2,600 metres (2.6km) and the longest will be 7,400 metres (7.4km) in length.
“Up to 10 wells will be drilled before the production of first oil in 2025. The rest of the wells will be drilled as production progresses.”
EFFECTS ON ENVIRONMENT
“The Authority (PAU) is working with National Environmental Management Authority (NEMA) and other agencies like the National Bureau of Standards (UNBS) to ensure the strictest environmental and safety practices and technology in the planning, execution and decommissioning of oil and gas projects in Uganda including this Kingfisher oil project,” said Rubondo.
In this regard, CNOOC undertook an environmental social impact assessment for the project, and this involved public hearings and other consultative processes. The environmental social impact assessment was approved by National Environmental Management Authority during March 2020 for implementation.
An environmental, health and social management framework which include environment and social management plans, oil spill contingency plans and emergency, preparedness and response plans have been developed to monitor and manage any potential negative impact to the environment, including lake Albert and its host communities.
WASTE MANAGEMENT
“The facility for treating petroleum waste that will be generated from this project (Kingfisher oil field) has been set using the latest waste treatment technology, and is ready to receive and treat waste. The contract to manage and treat waste from this project is being executed by a consortium of a Ugandan company, Luweero Industries, a subsidiary of the UPDF and an international firm from China,” said Rubondo.
The Petroleum Authority of Uganda has approved 92 contracts since the Final Investment Decision was announced at the beginning of 2022 for the Kingfisher project. These contracts total 1 billion dollars, and out of these, contracts worth 270 million dollars have been awarded to Ugandan companies; mainly in the areas of civil works, hospitality management, transportation and ICT.
The project, Rubondo said, ensures skills development, and has so far trained 700 youths in vocational skills like welding, heavy vehicles driving, electrical among others.
