398
A. R. Tom
Venezuela all occurring in 2006. Similarly, the Oil price collapse in
August 2014 from USD 100.80 per barrel to USD 29.44 per barrel in
January 2016 emphasized the exposure of many countries to oil price
volatility (Bharat Petroleum 2017; Stroebel and Van Benthem 2013).
Furthermore, the weaker oil price led to the deferral of Final Investment
Decisions (FIDs) for about USD 380 Billion worth of new Upstream
and incremental investment projects (WoodMac 2017). Countries on
the verge of production, therefore need to develop broader-based strategies to ensure that fiscal terms are efficient under low and high oil
prices.
In August 2016, the Government of Uganda (GoU) granted eight
petroleum production licenses to a joint venture (JV) split equally
three ways between Total E&P Uganda (TEPU) a subsidiary of Total
SA, Tullow Oil plc and China National Offshore Oil Corporation
(CNOOC). This was in addition to the 2013 Production license granted
to CNOOC. The JV partners are estimated to spend 18 Billion dollars
on Upstream infrastructure and wells before first oil, and $4 Billion on
the World’s most prolonged heat traced crude export pipeline measuring
1443 km traversing from Hoima to Tanga port. The joint venture
is currently mandated to take their Final Investment Decisions (FID)
within 18 months and commence production by 2020. Furthermore,
the country’s first open competitive licensing round for petroleum exploration covering six blocks was launched in 2015 and is yet to be
concluded (DoP 2017). In light of the recent oil price collapse, the
project viability of the greenfield development under the current fiscal
costs is questioned.
With the Uganda project on the brink of production and licensing of
subsequent projects, this chapter presents a critical intertemporal analysis of Uganda’s fiscal regime from the Government perspective and
its impact on the planned Oil projects. Specific emphasis is applied
to the full cost structure of the projects with the analysis seeking to
determine the possible reaction of the investors utilizing the range of
the fiscal terms applied within the country from 2004 to 2012. The
study further highlights the fiscal incentives availed to date and their
impact on the project viability in the new oil price environment. The
study employs both a qualitative and quantitative analytical approach to
A. R. Tom
Venezuela all occurring in 2006. Similarly, the Oil price collapse in
August 2014 from USD 100.80 per barrel to USD 29.44 per barrel in
January 2016 emphasized the exposure of many countries to oil price
volatility (Bharat Petroleum 2017; Stroebel and Van Benthem 2013).
Furthermore, the weaker oil price led to the deferral of Final Investment
Decisions (FIDs) for about USD 380 Billion worth of new Upstream
and incremental investment projects (WoodMac 2017). Countries on
the verge of production, therefore need to develop broader-based strategies to ensure that fiscal terms are efficient under low and high oil
prices.
In August 2016, the Government of Uganda (GoU) granted eight
petroleum production licenses to a joint venture (JV) split equally
three ways between Total E&P Uganda (TEPU) a subsidiary of Total
SA, Tullow Oil plc and China National Offshore Oil Corporation
(CNOOC). This was in addition to the 2013 Production license granted
to CNOOC. The JV partners are estimated to spend 18 Billion dollars
on Upstream infrastructure and wells before first oil, and $4 Billion on
the World’s most prolonged heat traced crude export pipeline measuring
1443 km traversing from Hoima to Tanga port. The joint venture
is currently mandated to take their Final Investment Decisions (FID)
within 18 months and commence production by 2020. Furthermore,
the country’s first open competitive licensing round for petroleum exploration covering six blocks was launched in 2015 and is yet to be
concluded (DoP 2017). In light of the recent oil price collapse, the
project viability of the greenfield development under the current fiscal
costs is questioned.
With the Uganda project on the brink of production and licensing of
subsequent projects, this chapter presents a critical intertemporal analysis of Uganda’s fiscal regime from the Government perspective and
its impact on the planned Oil projects. Specific emphasis is applied
to the full cost structure of the projects with the analysis seeking to
determine the possible reaction of the investors utilizing the range of
the fiscal terms applied within the country from 2004 to 2012. The
study further highlights the fiscal incentives availed to date and their
impact on the project viability in the new oil price environment. The
study employs both a qualitative and quantitative analytical approach to