‘Too late for new comers in Uganda oil sector’

Kampala, Uganda | THE INDEPENDENT |  Major contracts for construction activities for the Tilenga project have been awarded two years after a Final Investment Decision (FID) for the project was taken.

The project is located in Bulisa and Nwoya districts and is led by TotalEnergies. Philippe Groueix, the Chair of TotalEnergies in Uganda and General Manager of TotalEnergies EP Uganda said with the big contracting period over, the focus should be on the execution of the contracted works.

TotalEnergies and the joint Venture Partners CNOOC were expected to award contracts worth over $6 billion for 40 work packages for the Tilenga, Kingfisher, and East African Crude Oil Pipeline (EACOP) Projects at the time when the FID was taken in February 2022.

Philippe Groueix told the 4th National Content Conference in Munyonyo that there are very few contracts remaining for construction activities.

“So you will say it is not good news for those who are not in. Because opportunities are now limited” he said. Those who were left out of the contracting period will have to wait until the construction is done and when oil production begins.

. “So I’m very pleased to see that some Ugandan companies have already invested to prepare this operational phase, “said Groueix

The company expects to hire some Ugandan companies to run some of the facilities during the 25-30-year period when Tilenga will be producing oil. With the contracting period done, the company and its subcontractors have to have the facilities up and running within four years or 48 months if they are to meet the first oil deadline of 2025.

Philippe Groueix advised all contractors to adhere to requirements on health and safety, and quality standards.

“We are a group of people climbing Everest and have a rope between us. And if one is not able to walk at the same pace, we shall not reach the summit. So that is why quality is that important. There will be no compromise” he stressed

National Content in Tilenga Project

The project is required to meet objectives to ensure that Ugandans take up jobs in the sector.  Philippe Groueix said they are determined to ensure that those objectives are met.

“From the start of the project, we set up objectives with the Petroleum Authority in terms of the number of Ugandans to be employed, in terms of man-hours of training, in terms of local goods and services, and in terms of amounts spent for capacity building. I can tell you that all these objectives will be exceeded”

He insisted that national content is not about lowering the expectation on quality. “For the new joiner, you need to understand the expectation on quality”

“Today we already exceeded the employment objective but all the others will be exceeded before the end of the project” he added. Difficulties for local players While several jobs went to local subcontractors, many have complained about the delay in payment after invoicing.

Groueix explained that part of that anomaly was caused by the failure of the local contractors to understand the contracts before signing.

“It is very important that you understand the contract before you sign. Because once a contract is signed, the contractor has to execute” he advised.   Suppliers of goods and services to the industry have complained that TotalEnergies and its contractor were taking over 120 days before the invoices were paid.

“I don’t want anyone to be taken by surprise and to sign up for things that they don’t realize the consequence. If it is mentioned that you will be paid within 120 days and it is too difficult for you, you need to discuss it before you sign,” he urged.

Many of the local contractors have also complained about difficulties with securing work capital from local banks.

TotalEnergies is constructing an industry enhancement center that is being put in Bugungu Buliisa district to help prospective suppliers overcome some of the challenges encountered during the last two years. According to the Petroleum Authority of Uganda, the FID in 2022 unlocked an investment of between USD 15-20 billion in the country’s oil and gas projects and their support infrastructure.

The Authority’s Executive Director, Earnest Rubondo, the total investment made directly in the sector in 2022, the first year after FID was US$ 1.2 billion, during the second year after FID. He said the direct investment is expected to be US$ 2.8 billion and the projection for 2024 is US$ 2.7 billion.

Rubondo said the objective is for Ugandan entities to secure 40% of this investment so that it is domiciled in the country.   The contracts approved by the Authority since 2021 amount to over $7 billion. The authority estimates that about $1.7 billion or 25% went to Ugandan companies.

“It is important to note that these approvals have been for the first-tier contracts. As the companies that have won the 1st tier contracts also contract at the second and even sub-contract at the third tier, Ugandan content is increasing and we should achieve the 40%.” Rubondo revealed.

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