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We shall survive, says Tullow Boss as Government promises Christmas present

Tullow Oil‘s Vice President Tim O’Hanlon’s speech on Tuesday at the Africa Oil Week in Cape Town delivered a message of hope to a hall full of oil industry executives that are faced by the same problem: declining oil prices.

Energy Ministry Permanent Secretary, Kabagambe Kaliisa at the launch of the licensing round in Kampala. (Photo: F. Nalubega)

Energy Ministry Permanent Secretary, Dr. Kabagambe Kaliisa  (Photo: F. Nalubega)

Mr. O’Hanlon told delegates that just like it has been in the past, this prevailing cycle of low crude prices would also come to pass. “A diamond is but a lump of coal that did not quit under pressure,” he said. “Surviving at sub-fifty dollars (a barrel) in this oil business is tough, but we must.”

The industry has been hit hard by low oil prices, forcing many of them-majors and minors alike, to take extreme austerity measures just to stay afloat.

The Tullow Chief also hinted that his company expects the long-awaited production licenses in Uganda before the end of year. “The Government of Uganda has reassured us that it shall give production licenses before Christmas, something they said was delayed by lack of some institutions that were not in place, but which have been installed.”

Last week, President Museveni inaugurated the Boards of the National Oil Company and the National Petroleum Authority, effectively operationalising both institutions.

Production licenses

The Permanent Secretary at the Energy Ministry, Dr. Kabagambe Kaliisa, told the meeting that with relevant key institutions in place, production licenses shall be awarded “very soon.” He also attributed the delay to other factors including the need for companies to finalise appraisals and provide better recovery figures for the different wells, as well as concerns over applicable tax regimes.

Government made a similar promise around the same time last year and some delegates were doubtful that it would come to pass this time round. “You are getting this from the horse’s mouth,” reiterated Kaliisa. “You need to trust government. They will be issued before close of the year.”

No room for mistakes

Dr. Kaliisa talked about Uganda’s plans to build oil infrastructure, including a pipeline. He said government continues to weigh the two options for the pipeline route, through Kenya or Tanzania, to determine which one would be cheaper and more feasible.

The oil companies operating in Uganda have different preferences for the pipeline route, with Total E&P reportedly in favour of the Southern route through Tanzania to Tanga port and Tullow in support of the ‘traditional’ route through Kenya to the coast. “We shall go with what is most cost effective because the stakes are high, we can’t afford to make wrong decisions,” said Kaliisa.

The 22nd Africa Oil Week attracted thousands of delegates,  mainly from governments and the private sector. The dominant narrative appeared to be that Africa remains highly prospective, and oil and gas companies should look to it for survival.

Report by Flavia Nalubega