Tilenga and Kingfisher, two of the most anticipated oil projects from Uganda, have gained steam and are well on track against all odds
This can be accounted a huge achievement for the country, owing to its discernable local participation. Of the 35 well pads required for drilling more than 450 wells, Mota Engil Uganda Ltd is in charge of constructing 31 well pads sites, including other activities such as conductor pipes installation and well cellars construction. Starting from bush clearing, fencing, construction of drainage and internal roads to preparation of the ground to host different facilities, Mota Engil Uganda is tackling over 700 acres of industrial zone. Among other installations, it is to include a central processing facility (CPF), construction camps, drilling support bases, and operation support bases.
While Mota Engil Uganda Ltd is associated with the developments of the Tilenga project, the Kingfisher is being handled by another Ugandan company, Excel Construction Limited. Excel's activities range from civil works and the making of in-field access roads to 1, 2 and 3 well pads construction. In Tilenga, ZPEB Uganda Limited won the contract for the construction of drilling rigs.
Last year while confirming the contracts, Ernest Rubondo, the executive director of the Petroleum Authority of Uganda, shared his satisfaction stating that local companies such as ICS New Plan and MSL, among others have made it to Tier 1 level, whereby multi-million/billion dollar contracts (US$40bn and above) are given to major companies. They enjoy the power to sub-contract several companies in Tier 2, who can further make a similar move with Tier 3 companies or enter into a joint venture with international organisations.In Kingfisher Drilling Area, more than 15 major contracts are in Tier 1 across various areas from EPC construction supervisor, rig integrated services, drilling waste management, downhole pressure gauge to coring cutting and fishing services, ESP and heat tracking, wellhead and Xmas tree, casing and tubing, to mention a few. Mota Engil Uganda has sub-contracted other local bodies, including Gauff Consultants, Prand Engineering, Civtec and Fabrication Systems.
Uganda National Oil Company (UNOC) holds a 15% stake in both Tilenga and Kingfisher Development Areas, besides TotalEnergies and China National Offshore Oil Corporation. According to Herbert Ssempogo, head of corporate affairs at UNOC, the company plays a pivotal role in the Joint Venture activities including participating in the joint venture meetings, reviewing, and approving/recommending proposed work programmes and budgets and reviewing bidder lists and recommended contract awards, hence ensuring value retention for Uganda (national content).
While these facts and figures surely paint a rosy picture, a recent blog penned by Dennis Kamurasi, vice chairman, Association of Uganda Oil and Gas Service Providers (AUGOS), pertinently highlights certain issues that need prompt addressal to maintain the well-earned progress. "One major concern is the late payment of invoices. While contracts typically have a payment period of 45 days, many invoices have been left unpaid for over 100 days. These delays have created problems for contractors, making it difficult for them to pay their own suppliers and leading to defaults on loans. This not only affects the contractors themselves but also creates a negative impression within the banking network and hinders the sector’s growth. If this situation continues, local content will suffer, leading to foreign companies dominating the industry and capital flight from Uganda.
"Another issue is the small percentage of advance payment provided to contractors. Contractors are expected to complete projects without receiving full payment upfront and must wait for 45 days before being paid. This has put some companies in a challenging position, especially those with limited experience in the sector. The lack of advance payment also makes it difficult for contractors to secure financing from banks", the blog reads.
If these technical concerns are neglected for long, promising initiatives like the National Content Development targets might fall flat. With the right steps, Uganda's path to economic self sufficiency will not be far-fetched.
To know more about the recent developments of the Tilenga and Kingfisher projects, read: https://www.oilreviewafrica.com/exploration/exploration/drilling-of-first-well-in-kingfisher-field-uganda-is-complete
