No Barrel Of Uganda’s Oil Has Been Sold- Gov’t

The start of drilling of oil and gas by the CNOOC and TotalEnergies has reignited suspicion that Uganda’s oil is already being smuggled out of the country.

CNOOC Uganda Ltd began spudding or drilling wells at its Kingfisher project in January with President Museveni launching the exercise.

TotalEnergies has two drilling operations in Tilenga, which commenced this July in Buliisa and Nwoya districts in the Murchison National Park. The latest developments have been a target of deliberate misinformation.

There have been allegations that the oil is being smuggled out by some of the heavy trucks that have been seen in Tilenga and Kingfisher from February 2022 when the oil companies announced an FID for the Lake Albert Development Project.

The trucks according to the Petroleum Authority have been delivering equipment like drilling rigs and materials for the construction of facilities needed in oil production.

The Petroleum Authority of Uganda however insists that no single barrel has been sold either at local or international markets as alleged. Alex Nyombi, the PAU Director for Development and Production says not even the test crude extracted during good appraisals was sold.

“No single barrel of oil has been sold. There was simply no way. Let’s just look at the commercial bit of it. A barrel of oil is 159 liters. Crude oil can not be used when it is crude. Those 159 liters today on the market are about $80. Now the nearest point you would sell this oil is Mombasa. Imagine what mode of transport you would use to transport this oil to Mombasa and it still makes commercial sense,” explained Nyombi.

According to Nyombi, it makes no commercial sense to transport the crude using tucks, which is the reason why the government and the joint venture partners are insisting on building the East African Crude oil pipeline to have the crude transported to the international market through the port of Tanga in Tanzania.  “This is why you need a bulk transportation system like the pipeline. Anything else cannot make economic sense” he said.

Kenya had in 2018 through its early production scheme flagged trucks to transport its oil by trucks from its oil-rich region of Turkana to the port of Mombasa. The use of trucks was heavily criticized by Kenya’s civil society platform on oil and gas (KCSPOG). Apart from transportation, Nyombi explained that when crude oil is extracted from the ground, it comes with impurities it has to be cleaned through the Central Processing Facilities(CPFS).

“There are no such facilities here. All these things are just getting constructed. It does not make sense,” he said.  

CNOOC and TotalEnergies have plans to put Central Processing Facilities to clean and stabilize the crude. Oil from Kingfisher will be transported by feeder pipelines northwards for about 50 kilometers through the Buhuka escarpment in Kikuube district to Kabaale in Hoima where the refinery will be constructed.

While that from the Tilenga development will through a feeder pipe be transported south of the facility 100kilometers to Kabaale which will be the starting point for the EACOP (East African Crude Oil Pipeline).

Why Drill/ Spud if Crude is to remain underground?

Those alleging that oil is being produced and smuggled in trucks have asked why to drill now. According to Nyombi, a single well can produce about 2000 barrels of oil per day.  “Therefore, how many wells do you need to produce? You need very many wells. That is why drilling must start in advance before the pipeline is in place.

Nyombi explained that when the drillers have drilled up to the reservoir, they put in equipment like casings to ensure that there is no blowout of the crude. The well is then closed and then the rig is moved to another section of the well pad.

“When the time comes, all these wells are going to be connected and switched on. So you can not have one well and then state commercial production” he explained.

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