Insurers want Government to compel oil companies to take on local insurance

 

BY PAUL TENTENA

Uganda local insurers under their umbrella body Uganda Insurers Association (UIA) have asked the government to amend some of the oil laws to compel oil companies to take on local insurance.

According to Jonan Kisaakye the Chief Executive Officer of Uganda Insurers Association, because the existing laws don’t compel oil companies to take up local insurance, local marine cover and premiums are lost to foreign markets as a result.

Kisaakye who was speaking at Kampala Sheraton Hotel during a Press Conference that was organized by the Uganda Chamber of Mines and Petroleum (UCMP) said they have so far issued three policies worth $23.8 million for the Tilenga Oil Graben.

“We have so far been able to issue three policies for the Tilenga project amounting to about $15.2 million which is about $2.7 million per loan.

“For CNOOC, we are in the range of $5.9 million in written premiums,” said Kisaakye.

He said 19 locally licensed insurance companies formed a consortium where their re-insurance capacity is $1.5 billion.

“EACOP insurance capacity is around $1.6 billion. This means that local companies are not very far away from insuring such a project,” said Kisaakye.  

The Uganda Chamber of Mines and Petroleum is running the third edition of 90 Days of Oil and Gas Media Campaign with the main objective of giving an update on the sector’s projects, emerging opportunities, challenges, and possible solutions.

Under the theme, “Facts Behind Uganda’s Oil and Gas Sector” and hashtag #90DaysofOilandGas the campaign kicked off on August 1^st and will climax on October 31.

It is a continuation of the previous campaigns geared towards information gathering and dissemination to spur sector growth.

Humphrey Asiimwe, the Chief Executive Officer of UCMP said as the oil and gas sector development phase gains momentum, a campaign of this nature is critical.

“We are offering an opportunity to oil and gas sector reporters to get fast-hand and accurate information as they tell their stories.

“We also want to offer space for sector players to interact, network, and share opportunities for growing their enterprises and the sector as a whole,” said Asiimwe during the press brief.

There are planned media engagements in the form of press conferences, news articles, exclusive/one-on-one interviews, and events where reporters can cover and get on top of the oil and gas sector story.

At the end of the campaign, Asiimwe said, UCMP intends to see improved reporting on matters oil and gas sector.

The campaign is designed to run on weekly topics including opportunities and challenges, updates on sector projects, taxation, insurance, sectoral linkages, environment social and governance issues, women and youth, local content and value addition, the role of the media, financing of the oil and gas sector and the role of civil society organizations and more.

The third edition of this campaign is happening 19 months after the signing of the Final Investment Decision (FID) on the Lake Albert Development by TotalEnergies EP Uganda, CNOOC Uganda Limited, the Uganda National Oil Company (UNOC), and the Tanzania Petroleum Development Corporation (TPDC).

After the signing of FID, the government envisaged that between US$15-20 billion would be invested in what it termed as the ‘development phase’ before first oil is achieved in 2025.

A significant amount of this money has so far been invested in the development of the Kingfisher and Tilenga projects in the Albertine Graben and the construction of the East African Crude Oil Pipeline (EACOP) and other sector projects.

The government hopes that investments after the FID will facilitate Uganda’s GDP growth by 22% and also unlock thousands of jobs and related opportunities.

As of 2006, Uganda’s discovered commercially viable oil reserves are estimated at 6 billion barrels of oil with 1.4bn being recoverable.

The country’s oil projects are a collaborative effort between TotalEnergies EP Uganda, CNOOC Uganda Limited, and the Uganda National Oil Company (UNOC), with the key facilities for the project encompassing the Central Processing Facility (CPF), well pads, flowlines, lake water abstraction, and other vital components.

Three rigs have been designated for the drilling operations on the Tilenga project – managed by TotalEnergies. Presently, SINOPEC 1501 is operational at the Jobi-5 well pad and commenced drilling operations on June 28, 2023. 

For the Kingfisher Project – managed by CNOOC, the LR8001 rig has been operational since January 2023.  Both rigs at Tilenga and Kingfisher have noise-suppressing technology and are fully automated and environmentally friendly.

Data from Petroleum Authority of Uganda (PAU) indicates that other midstream and downstream projects like the Kabalega International Airport are progressing well above 90% completion rate.

The Refinery Project - expected to refine 60,000 bopd at Kabaale is on course to get a joint venture partner while the East African Crude Oil Pipeline (EACOP) has made progress with land acquisition activities and payment of compensation for Project Affected Persons (PAPs) standing at 84% – the total number of Project Affected Persons is 3, 648, and those compensated are 3052 as of the end of July.

Other key activities include environment and livelihood restoration and improvement initiatives, transitional support, vocational training, and other support provided to the PAPs.

Several replacement houses have been fully handed over to the physically displaced PAPs by EACOP among other issues.

Local content

To ensure that Ugandans benefit from their oil resource, the government set up National Content Development targets where at least 40% of the amount spent remains within the country’s economy through the use of Ugandan goods and services and by training Ugandans to undertake the sector’s work.

According to the Petroleum Authority of Uganda data, as of the end of June, 12,949 people had been employed directly in the sector with Ugandans taking approximately 94% of the jobs. A total of 3, 871 (excluding EACOP) are from host communities.  

In addition, a total of over 14,000 Ugandans have been trained and certified in various oil and gas disciplines of Welding, Health Safety and Environment, Heavy Goods Vehicles, and more.

In addition, 200 government officers from various ministries and agencies have been trained in oil and gas-related disciplines; Micro Small and Medium Enterprises Business Linkages Project (MSMEs) targeting 200 MSMEs has trained 280 MSMEs in EACOP districts.

More than 4,000 Small and Medium Enterprises (SMEs) have been trained in key oil and gas business requirements.

Cumulatively US$7.086bn has been approved for spending by the oil companies and US$1.762b (25%) of this is going to the Ugandan companies.

In the last 5 years, out of US$1.3bn of the smaller procurements, US$1.2bn has gone to Ugandan-owned companies (which is approx. 90%). Approx. 73% of the companies involved in supplying the sector have been Ugandan companies (460/624).

In addition, approx.US$988,658 has gone to the community economy through the provision of goods and services.

Proscovia Nabbanja, the Chief Executive Officer of Uganda National Oil Company Limited said as UNOC they are the first pass of national content because they are government-owned representing the interests of Ugandans.

“We are together with our partners TotalEnegies and CNOOC in the development of Tilenga and Kingfisher where we hold 15% participating interest,” she said. 

Jeff Baitwa, Trustee on the UCMP Board said, “Most of us playing a role in the oil and gas contracts, we have strict guidance on environment management.”

Aggrey Ashaba, UCMP General Secretary said as UCMP they try to be the link between the public and the private sector to make sure that all parties have a win, win situation.

“When the private sector thrives, then the government benefits in terms of jobs, taxes,” he said.