TUESDAY, SEPTEMBER 15, 2015 prosper.

business feature

Daily Monitor

Delayed oil dreams hurting many Ugandans

in anticipation of production.
The $3b oil refinery, where negotiations with a Russian conglomerate,
RT Global Resources is just shy of
seven months.
The oil pipeline negotiations are
yet to reach a financing stage as a
route has only just been agreed. A
modulation by the campaign group,
Global Witness indicates that for the
government to make money from
the sector, oil prices should be in the
Shs219,600 ($60) per barrel range.
On the other hand, oil companies
in Uganda have had their fair share
of pain.
According to Ahlem Friga-Noy, the
Total head of corporate affairs, Total
E&P Uganda has to adapt to the pace
of the project, while also taking into
account recent trends in the international crude oil price and their impact
on our capital-intensive industry,
Globally, Bloombergs estimates
place at least 100,000 jobs could have
been lost in the last one year due the
oil price plunge. Uganda is part of
that cycle.

Hurting. Dates of oil production have consistently

been shifted amid falling internal prices. This is hurting
companies that had projected early production.
BY MARK KEITH MUHUMUZA
mmuhumuza@ug.nationmedia.com

NUMBERS

200

The number
of people that
sources say
have so far lost
jobs in the oil
and gas sector.

n one of Kampalas suburbs

along Bukoto-Kisasi road is an
entire parking lot of trucks.
They are branded trucks with banners reading Baker Hughes and
Halliburton.
Some of the earth moving equipment has been lying idle for the better part of the year, the reason being
an oil sector that has been quiet as oil
companies await issuance of production licences.
The equipment is only part of the
story that highlights how businesses
have stalled and people laid-off.
Some of them, including Bemuga
Forwarders and Three Ways Shipping Group have laid back and are
now held together by hope.
Dreams of many have been sent
down the drains at least for now.
Suppliers have had to lay-off workers and so have oil companies as they
cope with the inactivity in the sector
worsened by the complete crash of
oil prices.
Doris (name withheld on request)
used to be an employee of the oil
company, Tullow. On a good salary,
she was looking on the positive side
but all this came crumbling in May
2015 when she was among the 120
that were laid-off.
The situation wasnt unique to Tullow. CNOOC and Total have all sent
some workers into redundancy.
However, industry statistics are
scanty on the actual numbers of how
many people have been sent packing
so far.
But reliable information indicates
the three oil companies have laid off
more than 200 workers.
The Association of Oil and Gas Sup-

Workers discuss
around an oil rig
in the Albertine
Graben area.
Delayed oil
production is
causing jitters
among producing
companies and
employees in the
sector. PHOTOS BY
FAISWAL KASIRYE.

pliers (AUGAS) puts the number to at

least 1,000.
Notably some of the international
contractors like Schlumberger, Baker
Hughes, and Halliburton have all laidoff several employees both locally
and globally.
For some of these international
companies, this measure is routine,
however, it shatters the dreams of
many including those who have in
their hundreds been taking on oil related courses in various universities
across the country and abroad.
Locally, bankers are also stuck with
several non-performing loans from
the oil and gas sector. This explains
why bankers would like the sector
to kick-off. Insurers too are basically
playing the waiting game as the anticipated early oil production may
just delay some more time.
The optimism has subsided for
now, as over a year ago, an Indus-

trial Baseline Survey conducted by

CNOOC, Total, and Tullow pointed
out that at least 15,000 jobs would be
created directly.
Another 150,000 were projected to
be created indirectly. All this would
be at the peak of oil production.
Uganda is not in that phase yet.
Oil price double jeopardy
Uganda is yet to start producing oil,
but it is paying the price for the fall in
global international oil prices.
It is paying the price because it is
already in the process of becoming an
oil producing country. Oil prices are
hovering around the $50 mark, sometimes lower than that for a barrel.
This is down from $100 at the start
of 2014. Globally, jobs have been lost,
countries like Angola and Nigeria that
are oil dependent, are all beginning to
struggle. The Uganda government is
going ahead with two major projects,

IS GOVERNMENT PLAYING THE HARDBALL WITH OIL FIRMS?

t the Presidential Investor Roundtable last

month, Irene Muloni
appeared unshaken by developments in the oil sector, as speakers asked about the issuance
of oil licenses, which remains a
key demand for the companies.
The government has continued to tow a similar line on the
licenses with Muloni saying:
We have had discussions with
them. There were key outstanding issues like the size of wells
and recovery rates. Tullow has
submitted the addendum to the
reports and Total is yet to submit. If they do, we will conclude
this by the end of next month
(September).
Talk to any government of-

ficial in the ministry of Energy,

the response is always short
on detail and gives a date that
some have termed as a tired
song.
For instance, Muloni had
noted to Reuters, a news agency
last year that production licences would be issued by the
end of 2014. That didnt happen.
Then back in March, she told investors they were ready to issue
the licences by Easter. That too
didnt happen.
This has frustrated many oil
investors as the negotiations
continue to drag on.
Sources indicate CNOOC has
also decided to use some of its
negotiating powers to nudge
government.

Investment drops
If there is a year that has been the
worst for the oil and gas sector, it
was 2014, according to Irene Muloni,
the Energy minister, who said investments in the oil and gas sector
dropped to Shs1.5 trillion ($413m)
from Shs1.95 trillion ($533m) in
2013.
Total invested Shs1.83 trillion
($500m) in supplier contracts in 2012
but Ahlem says they have cut their
expenditure because the country has
moved from the exploration and appraisal phase.
This ultimately resulted in a reduced demand for some goods and
services, she notes.
Also she notes there has been a
considerable reduction in the expenditure on oil suppliers as we move
forward with the government of
Uganda to finalise key required steps
towards development.
Tullows investment in Uganda had
peaked at Shs10.2 trillion ($2.8b) by
the end of 2013 but has dipped to
about Shs10.98b ($3b).
Tullow did not respond to request
for information yet it has been the
most vocal about delayed licences.