Uganda is on the verge of becoming an oil-producing nation, with President Yoweri Museveni spearheading the effort. The country has over 6 billion barrels of oil in place, with 1.4 to 1.7 billion recoverable. The crude, named Pearl Sweet, is a medium-to-heavy, low-sulphur grade. Vitol, a trader, has been appointed to market the oil. First commercial oil is expected in the first half of 2027.
The oil production infrastructure is taking shape, with TotalEnergies operating the Tilenga fields, designed for 190,000 barrels a day at peak, and CNOOC operating Kingfisher, designed for 40,000 barrels a day. The combined output is expected to be around 230,000 barrels a day. The crude will be transported through a 1,443-kilometer heated pipeline from Kabaale in Hoima to a marine terminal at Chongoleani, Tanga, in Tanzania.
The pipeline, known as the East African Crude Oil Pipeline (EACOP), will be one of the world's longest heated crude pipelines, built to move 216,000 barrels a day and ramp up to 246,000 barrels a day. The ownership structure of the project is 62% TotalEnergies, 15% Uganda National Oil Company, 15% Tanzania Petroleum Development Corporation, and 8% CNOOC. The combined upstream and midstream investment has exceeded $10 billion.
Despite delays and cost overruns, significant progress has been made, with over 1,400 kilometers of pipeline already welded and buried, and pump stations under construction. The project has created thousands of jobs and will provide a significant boost to the economies of both Uganda and Tanzania. Tanzania will collect transit fees, taxes, and port work, while Uganda will receive rent, royalties, and a seat at the barrel.
The project has also sparked concerns about land and climate, with courts and campaigners contesting various aspects of the development. However, the industrial fact remains that a landlocked country has built an export machine with a coastal neighbor. The first oil cargo will not only mark a significant milestone for Uganda but also provide an opportunity for African business to capitalize on the new industry.
The long-term benefits of the project extend beyond the oil production itself, with opportunities for African companies to provide services and products to the industry. The project is expected to create over 160,000 direct, indirect, and induced jobs across the wider petroleum effort. The skills and expertise developed during the construction phase will remain in Africa even after the expatriate peak passes.
The success of the project will depend on various factors, including the petroleum revenue rule, the construction of a refinery, and the predictability of Tanzanian port fees. If these factors fall into place, the project could serve as a model for other African countries to develop their oil and gas industries. The wait for first oil is almost over, and the work for African business has just begun.
Key points
- First commercial oil production from Uganda is expected in the first half of 2027.
- The East African Crude Oil Pipeline will be one of the world's longest heated crude pipelines.
- The project is expected to create over 160,000 jobs across the wider petroleum effort.
