How will UNOC’s mandate evolve in the coming years?

UNOC’s mandate as a commercial player within various commercial agreements will experience evolution based on the specific value chain sectors involved. While the focus has been on projects related to upstream and the East African Crude Oil Pipeline (EACOP) FID, UNOC is already engaged in other ongoing projects and playing a commercial role. For instance, in the bulk trading of petroleum products business, UNOC is independently running operations and generating revenues. UNOC, in partnership with One Petroleum Ltd, operates the Jinja storage terminal, which contributes to revenue generation. Moreover, UNOC is in the process of securing a strategic partner for the Kampala storage terminal, which is expected to be a larger and more significant storage facility for the country. UNOC’s role in securing the supply of petroleum products is set to expand further.

In the upstream sector, UNOC holds a 15% participant interest on behalf of the state, making it an integral part of the development and production process in collaboration with Total and CNOOC. When the state, through UNOC, is involved in financing a specific development, UNOC ensures its active participation in the decision-making process. Being part of these projects allows UNOC to enhance its capacity and develop long-term independence.

Regarding the EACOP project, UNOC holds a 15% shareholding through its subsidiary, Uganda National Pipeline Company. This significant ownership makes UNOC a key shareholder alongside Total, CNOOC, and TPDC. UNOC’s role in the project is critical, and the decisions made by the company hold substantial importance for the long-term sustainability of this capital-intensive project in the East African region.

In the refinery sector, UNOC holds a 40% participating interest through its subsidiary, the Uganda Refinery Holding Company, representing the largest shareholding on behalf of the state. UNOC collaborates with the refinery consortium to ensure the project reaches the final investment decision stage within the agreed-upon timelines. Efforts are underway, such as environmental and social impact assessments and front-end engineering design, while working with the Ministry of Finance to secure financing for UNOC’s equity in the refinery.

Another project where UNOC plays a commercial role is the Kabaale Industrial Park, situated in the area where the refinery, export hub, and Kabaale International Airport will be located. This project showcases the interconnections between the oil and gas sector and other industries, offering opportunities for the development of petrochemicals, fertilizers, industrial gases, and cold-chain complexes, among others.

As UNOC moves forward, its role will evolve from structuring projects and seeking strategic partners to implementing projects, generating revenue, and contributing to the economic transformation of Uganda. The investment-to-revenue model adopted by UNOC estimates a return of $10 for every dollar invested throughout the lifespan of the projects, highlighting the company’s substantial impact on the economy.

 How important are social and environmental aspects in this process?

Social and environmental aspects hold paramount importance throughout the entire process. All projects undergo an environmental and social impact assessment (ESIA) to ensure compliance with guiding principles and conditions that protect the environment. UNOC, alongside its partners, closely monitors the operators’ adherence to environmental obligations as specified in the ESIA, environmental management programs, and national legal and regulatory frameworks.

While the oil and gas sector is often perceived as having a negative impact on the environment, considerable efforts have been made by international oil companies and the government to mitigate these concerns. For instance, Total has deployed cableless technology during seismic surveys, and the partners involved are implementing smarter technologies, such as cluster drilling and extended-reach wells, to reduce the environmental footprint.

Environmental aspects have been prioritized in the planning process, including initiatives like solarisation planning within the EACOP project. Additionally, social considerations are addressed through resettlement action planning in alignment with International Finance Corporation (IFC) standards and national regulations. The operators have also developed strategies for livelihood restoration, ensuring the social aspects are integrated into project development and implementation.

What is UNOC’s role in exploration activities?

UNOC actively participates in exploration activities as part of its strategic objective of ensuring reserves replacement and driving sustainability for Uganda as a national oil company. The Ministry of Energy and Mineral Development has qualified UNOC to participate in the request-for-proposals stage of the second licensing round. UNOC is diligently working to submit a proposal before the June 30 deadline, hoping to secure a license from the ministry. Once licensed, UNOC will seek a strategic partner who shares a similar long-term vision.

UNOC aims to find a partner with both the financial capacity and technical expertise required for exploration projects. While UNOC currently lacks the financial resources to execute all exploration programs independently, partnering with a company that aligns with UNOC’s strategic vision would allow for long-term sustainability and shared success. UNOC envisions a partnership where technology transfer, financing, technical capability, and national content are key components, with the possibility of UNOC assuming operatorship in the future, subject to negotiation and mutual benefit.

Apart from participating in the second licensing round, UNOC is also finalizing a Joint Application Agreement with CNOOC for one of the blocks in the Graben region.

What kind of strategy does UNOC have to ensure technology transfer?

Technology transfer is a crucial aspect for UNOC, and the company actively negotiates contracts to ensure partner companies have plans in place for skills and technology transfer. These plans involve understudying experts, training programs, and secondment opportunities that enable UNOC’s staff to acquire the necessary skills and capacity to execute work programs effectively.

UNOC aims to align its technological tools and systems with those used by its partners and peers. The company continuously assesses global trends and seeks partnerships that prioritize innovation and technological advancements. Areas such as artificial intelligence, machine learning, and robotics are under consideration, as they have the potential to enhance efficiency while minimizing costs. UNOC remains attentive to evolving global markets and business environments, ready to adapt and embrace technological advancements where appropriate.

What are your key priorities for 2021?

UNOC’s key priorities for 2021 encompass several crucial aspects. The primary focus is to unlock the sector in collaboration with the government and partners. The conclusion of agreements has initiated the launch of projects such as EACOP and upstream developments, opening up significant investment opportunities. The second priority is financing, recognizing that without adequate financial resources, the potential of unlocking the sector remains limited. UNOC emphasizes the importance of securing financing not only for equity participation but also to support the overall target operating model and resource requirements for executing strategies.

As the CEO, three critical areas demand continuous attention. Firstly, strategic delivery of projects, including financing and national content considerations, remains a top concern. Secondly, enterprise risk management is crucial, as a lapse in risk management processes can lead to complications in the industry. Lastly, talent management is a priority, as competition for talent within the sector and across other industries increases. Retaining skilled professionals and fostering a value proposition to keep them engaged and committed is essential.

What is your final message to international investors?

UNOC recognizes the fatigue experienced by investors due to the delayed project sanctions. However, there are reasons for optimism. Even during the COVID-19 pandemic and amidst low oil prices, significant transactions and tender renewals have taken place in the sector. Key commercial agreements related to projects like EACOP have been concluded, signaling a positive outlook for the market.

The Ugandan government has invested approximately USD 2 billion in infrastructure development and creating an enabling environment, eliminating reasons for further project delays. UNOC firmly believes that the country is on the cusp of success, with significant opportunities opening up for investment. Within the next five years, an estimated USD 15 billion to 20 billion will be injected into the country, presenting substantial prospects in an economy with a GDP slightly above USD 30 billion.

To participate in the sector, registration with the National Supplier Database is essential for accessing potential collaboration opportunities. Furthermore, tax incentives are in place to facilitate easier engagement in the industry. UNOC commits to providing accurate information to interested parties, avoiding information asymmetry, and fostering partnerships that promote supplier capacity and development. It is crucial for investors to prepare in a timely manner and seize the emerging opportunities. UNOC invites international investors to join in preparing for and embracing the positive momentum in Uganda’s oil and gas sector.