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Gov’t pushes final investment decision for oil production to September

FILE PHOTO: Oil exploration

Kampala, Uganda | THE INDEPENDENT | Government has pushed the Final Investment Decision (FID) for commercial oil production to September 2019.

Speaking during the budget presentation on Thursday, Finance and Economics Development Minister, Matia Kasaija said, “Preparation for commercialization of oil and gas resources continued this year. The lead investor for the refinery commenced detailed designs that will form final investment decision to be taken by September this year.”

He also said detailed designs for the crude pipeline were completed and the investment decision will be taken after the completion of negotiations with oil companies. The FID is when the project execution phase begins and the big money starts being spent on project implementation – this is often when key contractors get to work.

To reach FID, a project has to have a wide range of contracts and permits, which have allowed it to agree its investment structure and terms with its finance providers. The date for the FID is important.

It gives investors certainty and timelines to prepare money and start spending. The FID, which had been expected to take place last year, was delayed by the failure of  government to agree with oil companies on the various taxes and recoverable costs issue after Tullow Oil sold its interest to Total E&P and CNOOC.

The Minister’s announcement that they were still negotiating with oil companies on the pipeline modalities shows the complexity of the funding process. When the decision has been reached, up to US$15billion is expected to flow into the country for the refinery in Kabaale, the crude pipeline to Tanga in Tanzania and development of up 15 oil fields.

Also, related sectors like real estate, banking, and hotel and hospitality are expected to pick up immediately with activated activity in the industry. Realtors had said earlier this year that delayed FID has seen up to 80 housing apartments return to them after expatriates from oil companies went back home because of uncertainty around final investment decision.

China’s CNOOC and France’s Total and London-based Tullow Oil have the stakes in the two areas. CNOOC is the operator of the Kingfisher area while Total leads the development of Tilenga. Uganda, which has discovered 6.5bn barrels of oil with between 1.4bn and 1.7bn commercially viable expects to produce the first oil in 2022.

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