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Saturday, 28 February 2015


An oil exploration rig at Lake Albert.
Locally owned service providers in Uganda’s oil and gas sector are opting for joint ventures with international companies in preparation for the production phase, which is capital intensive.

Sources in the industry say production will demand more specialised skills, huge capital investment, complex technology and high standards.

“We are looking at joint ventures because they are sources of equity, technology transfer and skills development,” Geoffrey Bihamaiso, the group managing director at Three Ways Shipping told The EastAfrican.

For example, Bemuga, a local logistic company, has partnered with Chinese company Sanny, a firm dealing in construction equipment.

Service providers have recently experienced a downturn in business as exploration activities wind down due to a combination of the recent drop in international prices for crude and the apparent lack of progress towards licences for production.

“Currently, we are reviewing production licence applications with the oil companies, and the reduction in oil activities will only be for a short time. Service providers need to prepare for the development phase, which will take up to 70 per cent of their services,” said Kabanda Fred, the principal geologist at the Petroleum Exploration and Production Department.

The Association of Uganda Oil and Gas Service Providers recently held a forum in Kampala where members were taught how to secure contracts and practise good corporate governance and received information on issues related to joint ventures and partnerships.

Oil companies rely on services provided by other businesses, like drilling companies that own the rigs, handling services, local transportation, logistics, cleaning, legal, security and catering services and others. These services are required only when there are ongoing activities.

“The industry is suffering from a downturn in activity, and many service providers are laying off people or closing shop. But there is hope that things will get back to normal soon,” said Mr Bihamaiso.

Emmanuel Mugarura, the association’s CEO, said the current downturn is a blessing in disguise, because it is giving the service providers more time to prepare and train staff and build partnerships and joint ventures with international partners that have better capacity.

According to the Petroleum Exploration, Development and Production Act 2013, tier two foreign companies must have 48 per cent local ownership to be licensed to participate in the Ugandan oil and gas sector. The construction of the refinery, pipelines, oil storage facilities and new licensing rounds give hope for the service providers.

Last week, the government announced competitive bidding rounds for six blocks in the Albertine Graben. This means that successful bidders will start exploration drilling.

A week before, the government had announced the lead investor for the 60,000 bpd refinery in Hoima It is expected to create employment opportunities for service providers and the public.

Late last year, oil companies Total E&P, CNOOC and Tullow completed most field appraisals, except for Lyech field. They presented their field development plans and applications for production licences to the government.

Traidlinks, a non-governmental organisation, is now helping farmers in the Albertine Graben to supply food to oil camps. Other service providers are diversifying their products in order to compete for tenders in mega projects like hydropower dam construction and road projects.

“Markets that demand similar good and services have to be developed,” states a World Bank report Leveraging the Oil and Gas Industry for the Development of a Competitive Private Sector in Uganda, which was issued in January.

The East African

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