Oil and Gas FID and areas Startups can tap into

Oil and Gas FID and areas Startups can tap into

After years of negotiations between governments and oil and gas companies, Uganda has penned the Final Investment Decision (FID). For those ready to make their investment in the sector, the FID is a stamp of approval that companies can begin operations and that their “money will also be safe.” 

With the first commercial well discovered in 2006, government took other steps including further exploration, approval of National Oil and Gas Policy, enactment of Petroleum Act 2013, development of the National crude oil and export pipeline and refinery among other things to prepare Uganda to receive its first oil which has been projected for 2025.   

This agreement, the last of these initiatives, is expected to firm up awards in engineering, procurement, and construction areas of the sector. Oil companies are expected to invest up to US$10 to $15 Billion (Shs36 trillion) to develop the sector’s resources. According to Ruth Nakabirwa, Minister of Energy and Mineral Development, to facilitate the achievement of the FID, the government and the international oil companies had to agree on the following aspects:  the amendment of the production sharing agreement to improve the economies of upstream; amendment of the income tax act to reflect on the amendment of production sharing agreement; Conclusion of the firm down transactions by which Tullow was selling its entire interest to Uganda Upstream to Total E&P; Conclusion and signature of the host government agreement for East African Crude Oil Pipeline (EACOP); Enactment of the enabling legislation for the EACOP project conclusion and signature of the tariff and transportation agreement for EACOP and conclusion and signature of the shareholder agreement for EACOP. 

“This Memorandum of Understanding between Uganda and Total Energies BP is for collaboration towards ensuring energy security and transition through the deployment of large-scale renewable energy projects. So, the main objective is to advance renewable energy technologies, innovation through the identification of areas for collaborative research,” Irene Pauline Batebe, the Permanent Secretary, Ministry of Energy and Mineral Development said today.  

The 2008 National Content Oil and Gas Policy for Uganda enhances opportunities for Ugandans to participate in the petroleum sector directly and indirectly. 

In the past, local companies have been urged to take advantage of the opportunities presented by the oil and gas sector post-FID. However, important to note is the fact that the provision of services and goods to the sector comes with large capital requirements, physical assets, risk capacity, corporate governance, and expertise that local companies might not have. For local startups, partnerships with more established firms will be very key as they seek to provide goods and services.  

What opportunities can startups tap into? 

On January 21st, 2022, the Petroleum Authority of Uganda upgraded the National Supplier Database for Uganda’s Oil and Gas sector to improve accessibility and usage of the database. The FID has paved way for startups to tap into the opportunities including; 

  • Construction/Engineering  
  • Logistics 
  • Transport 
  • Electrical Services  
  • Waste Management 
  •  Agriculture 
  • Insurance 
  • Finance 
  • Renewable energy 
  • Hospitality 
  • Real Estate 
  • Procurement and Distribution among other direct and indirect services.  

  Job Creation 

In terms of employment, the Petroleum Authority of Uganda (PAU) says about 14,000 people will be directly employed by the companies, while about 45,000 people will be indirectly employed by the contractors. An additional 105,000 people will benefit from induced employment based on the utilization of other services by the oil and gas sector. Of the direct employment, 57 percent are expected to be Ugandans, which is expected to result in an estimated US$48.5 million annual payment to Ugandan employees. 

 At The Innovation Village, we are leveraging innovation, technology, and entrepreneurship to deliver solutions in different sectors of the economy. Through our Energy Lab, we will continue to ensure local startups have the capacity to participate in the sector but also ensure that they find innovative ways to offset some challenges regarding sustainability in the sector.  

“The Innovation Village provides support to ensure startups are registered, have quality and tested products and services and bring value to the sector. They have to be investment-ready, and our venture building initiatives can certainly help them get to that level,” Susan Asiimwe, Engagement Associate, Ventures Building at The Innovation Village says.