It isn’t news or it shouldn’t be. First oil will not be seen
by 2020 as earlier expected.
The rule of thumb is that for first oil it takes three years
from the signing off of the Final Investment Decision (FID). The FID comes
after commercial viability of the reserves has been ascertained and the Front
End Engineering & Design (FEED) of the necessary infrastructure has been
done. This helps determine the amount of investment needed.
"Given that we are at the tail end of the year, if the FID can be managed by December 31st then we can talk of 2021 at the earliest for oil to flow...
But fixating on first oil as a signal for the oil money to
start flowing is wrong.
During a recent New Vision function to consult stakeholders
on the progress of our Oil & Gas Journal, a Tuesday pull-out, that has been
running for almost a year now, Petroleum Authority boss Ernest Rubondo said tis
thinking would be to miss the boat entirely.
To illustrate Rubondo told of the supplier to the oil camps
who was in a dilemma because there was not enough beef of the required standard
in Uganda to meet the camps’ demand in a year or so.
I had to do a double take.
Not enough beef in Uganda for a few hundred people in the
oil fields?
As it turns out there is only one company in the country that
can supply the amount of beef, processed to the quality that they demand in the
country, but even it will not be able to satisfy the increased orders.
Our regular abattoirs do not meet the health standards to
supply the oil camps. Because think about it if I am hiring the top oil
geologist, or whatever they call them, to come all the way out to God forsaken
Uganda and even further afield to western Uganda, to help me make hundred
million dollar decisions, I can’t afford him reacting to the food in the area.
So the food he eats under my care has to meet the highest standards and more.
So if we don’t have enough meat, how can we have enough
fruit, eggs or even drivers and house help to support the industry.
About $20b (sh70trillion) or double this year’s national
budget, is going to be spent in setting up for first oil over the next five
years.
The investments are broken up into oil production, which for
now means preparing the Tilenga and Kingfisher oil fields. The
commercialisation of the crude that is produced in these fields, whose biggest
projects are the pipeline and refinery. In addition there are the investments
to support the above which include the Kabaale airfield and the “oil” roads.
We have neither the expertise nor the experience to play a
meaningful role in the financing or construction of the above. But in the
provision of services like hospitality & catering, security, logistics and
even waste management it is possible that local companies and individuals can
participate meaningfully.
But Rubondo pointed out that whether we have the capacity locally or not the functions will still be carried out with or without us...
Like the beef supplier who was willing to import the beef to
cover the deficit of local beef, the industry will find people from outside the
country to do the job.
The point is that to take advantage of the billions of
dollars that are set to flow through the industry you have to be set up and
ready long before first oil.
This involves formalising our businesses to take up
contracts or be attractive to foreign partners wanting to work here. Relatedly
it means stepping up the capacity of our companies financially and in human
resource in order to play.
It has been an interesting journey since commercial
viability of our oil reserves was established in 2006, 12 years ago. Some
people thought they could stampede us into producing oil in three years later,
in the absence of a legal framework or local capacity.
"Government’s insistence that we do everything properly, even if it takes forever has been the right way to think. In fact reasonable delays will allow us be better prepared to maximise the opportunity that comes with the industry for our local benefit...
Forget first oil. Be ready now. If you are not, it will be
too late by the time the first oil starts making its way down to the coast.
