CNOOC holding back over Kingfisher award in Uganda

China National Offshore Oil Corporation (CNOOC) has yet to award an engineering, procurement and construction contract covering its Kingfisher project in Uganda, despite making a recommendation to the government about a year ago.

Industry officials said CNOOC recommended a consortium of China’s Offshore Oil Engineering Company (COOEC) and China Petroleum Engineering & Construction Company (CPECC) as its preferred bidder, but stopped short of making the award partly because of a tax dispute with local government.

CNOOC has dismissed its project team, Upstream was told, although it is thought to have retained a skeleton staff in Uganda.

The COOEC-CPECC consortium was bidding against UK-listed Petrofac, which was not favoured, it is claimed by sources with knowledge of the development, due to issues with its technical proposals and local content requirements.

One reason that is claimed to have favoured the all-Chinese pairing for this contract was CNOOC's decision to switch from stick-build to modular pre-fabrication at COOEC’s Qingdao facilities in Shandong province.

Previously, COOEC and its partner — Petroleum Exploration & Development Research Institute, a unit of China's Sinopec Jianghan Oilfield — completed front-end engineering and design studies on Kingfisher.

Assuming the contract is awarded as planned, the scope includes building pump stations for Kingfisher's central processing platform facility, a lake water intake station, infield pipelines, ground facilities and export pipelines, as well as onshore facility work.

When being bid, the contract involved four packages, with EPC-1 covering pre-drilling work for three drilling pads and EPC-2 taking in a permanent camp, supply base, safety check station and civil works on the wellpads.

However, the most significant contract is EPC-3, which covers the central processing platform, infield flowlines and the water intake station.

The EPC-4 scope is centred on a 50-kilometre feeder pipeline.

Initially, CNOOC had been targeting first oil from Kingfisher this year — which itself would have been about three to four years behind the timeline first suggested — but it will now come on stream in 2023 at the very earliest.

The production would feed a proposed refinery to be built nearby at Hoima before being exported via the 1445-kilometre export line to the Tanga port in Tanzania, along with crude from Total's much larger Tilenga project in the northern Lake Albert area.

Phase one calls for development drilling in Kingfisher’s southern lobe, plus the fabrication of a central processing platform to be located at Buhuka with a capacity of 20,000 barrels per day.

That capacity will be doubled to 40,000 bpd in a second phase by adding another processing train that will also handle production from the Kingfisher North structure.

During phase two, the operator also aims to extend the export pipeline by 250 kilometres to Jinja, subject to government approval.

Kingfisher is believed to hold 800 million barrels of oil in place, of which 25% will be developed in phase one.

Sources said it is a challenge for CNOOC to reactivate the Kingfisher scheme in a tough business environment that has forced the operator to slash its 2020 budget by 10% to 15%, and its costs by at least 5 billion yuan ($714 million).

Most of the cuts will target CNOOC’s overseas projects, particularly those with limited investment returns and related to offshore drilling.

In April, CNOOC delayed drilling of a planned wildcat at the Pelles prospect in the Flemish Pass basin off Newfoundland & Labrador, Canada.