Nankabirwa urges oil marketers to cut fuel prices

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The Government is undertaking a moral suasion in a bid to have oil marketers cut the fuel pump prices specifically for petrol, diesel and kerosene.

In a free market economy, the Government cannot set price controls for goods and services but can use persuasion and other incentives to keep prices low for consumers. The pump price stands at about sh5,250 per litre for both petrol and diesel.

Energy minister Ruth Nankabirwa told the media on Wednesday, August 21, 2024, that she held a meeting with oil dealers and pleaded with them to lower their pump prices.

This was during the mid-year media briefing on the progress of Uganda’s oil and gas sector held at the ministry’s headquarters at Amber House in Kampala.

Moral suasion is the persuasion of a person or group to act in a certain way through rhetorical appeals, persuasion, or implicit and explicit threats — as opposed to outright coercion or physical force.

The Minister for Energy and Mineral Development, Ruth Nankabirwa presenting the latest developments in Uganda's Oil and Gas Sector at the ministry headquarters in Kampala on Wednesday, August 21, 2024. (Photo by Miriam Namutebi)

“The Uganda National Oil Company is helping by reducing the logistical costs. It must be reflected in a reduction in the pump prices,” Nankabirwa said.

Parliament in May agreed to a government's proposal to increase the excise duty imposed on petrol from sh1,450 to sh1,550 per litre. They agreed to increase the excise duty imposed on diesel from sh1,130 to sh1,230 per litre.

They rejected the plan to increase excise duty on illuminating kerosene from sh200 to sh500 per litre. If the fuel dealers do not absorb the planned tax increment, it might keep pump prices high.

$5b worth of contracts awarded

Providing an update on the production of oil, Nankabirwa explained that the contracts valued at $5b have been awarded for the Tilenga, Kingfisher, and East African Crude Oil projects, out of the $7.2b approved by the Petroleum Authority of Uganda.

Notably, $2b representing 41% of the total contracts awarded have been allocated to Ugandan companies, underscoring a strong commitment to local content and ensuring that significant benefits from these projects are retained within the country.

The sector directly employed 14,451 people, of whom 13,048 are Ugandans (90%). The licensees directly employed 1,403 people, of whom 67% are Ugandans. The licensee’s Contractors and their sub-contractors employed 13,399 of whom 92% are Ugandans. The companies sourced four thousand, four hundred eighty-three (4,483) employees from the local communities.

The minister said this was the second briefing during 2024 and that it is a testament to the Government’s unwavering commitment to transparency and accountability, in line with the principles of the Extractive Industries Transparency Initiative (EITI).

On the Tilenga Project, spanning both the North and South of the Nile in Nwoya and Buliisa districts 63 out of the planned 426 wells have been successfully completed, with positive hydrocarbons seen in the targeted reservoirs. Additionally, development plans for a Liquefied Petroleum Gas (LPG) facility have been submitted to the government and are currently awaiting approval, and the issuance of a license is making remarkable progress.

Drilling activities have so far focused on six of the 31 well pads that will host 426 producer and injector wells for the Tilenga project. The well pads are Jobi-Rii 05 & 04, Ngiri 03 & 01, and Gunya 01 & 04. All three rigs designated for drilling are operational, and a total of 63 wells have been drilled as of August 16, 2024. Currently, seven well pads are over 85% complete and ready to receive a rig.

The Kingfisher Project, located in Kikuube District, is operated by CNOOC Uganda Limited on behalf of the joint venture partners. The development plan includes a Central Processing Facility (CPF) with a capacity of 40,000 barrels per day and the drilling of 31 wells across four well pads.

Drilling of production wells began in January 2023, using a single rig operated by China Oilfield Services Limited (COSL). So far, nine of the eleven wells required for first oil have been drilled.

She said the ministry was finalizing the review of the National Oil and Gas Policy to ensure that sustainable development of the petroleum resources is in tandem with the current dynamic global environment.

“Balancing economic growth, social development and environmental conservation remains a priority as the country navigates its path to prosperity,” Nankabirwa explained.