Stanbic and Absa commercial banks have said that they have the capacity to finance Ugandan companies for investment in the oil and gas sector.
Many local firms have been reluctant to apply for exploration of oil fields in the Albertine Grabben due to lack of financial capacity given the risks and huge costs involved. This has left the sector to the big, foreign companies such as China National Offshore Oil Corporation (CNOOC) and Total.
But Stanbic, a member of Standard Bank Group, said it can offer up $70 million to a single company investing in the oil and gas sector in Uganda.
The Bank’s Head of Power and Infrastructure, Henry Kamuntu, said it is crucial that Ugandan companies get prepared to participate the upcoming developments as oil companies prepare for the flow oil from the Albertine.
“It is a very exciting period. I’m one of those who strongly believe that if this opportunity had come even two or three years ago, I don’t believe that we would have been holistically ready as a country for the opportunity to participate in it,” said amuntu.
Kamuntu said he believes the delays have created room for individuals to create the capacity, to build themselves for this opportunity. And this, he added, also extends to the banking sector.
According to Kamuntu, Stanbic alone controlled almost 20% of the local balance sheet capacity in 2020. “We have at least a single limit of seventy million dollars. So we can lend up to$70 million of our local balance sheet to any local contractor looking to participate in this transformational opportunity” Kamuntu revealed
Speaking during the 7th Annual Oil and Gas Convention last week, Mr David Mparuta, the Absa head of enterprise and suppliers’ chain development, corporate and investment banking, said the bank is ready to provide financial support to investors in the oil and gas sector.
During his presentation, Mparuta said Absa had within the Group built capacity to fund oil and gas projects noting that the bank had recently funded a $12m project through a single transaction for a local contractor in the oil and gas value chain in a market he did not mention.
“There is no cap on the financing available for Uganda – each transaction and contract will be assessed individually,” he said, noting they will seek partnerships with insurance companies to ensure that assets are fully covered in the event of loss, damage and significant downtime.
“We have a unique credit standard to support this business as well as dedicated resources both in Uganda and South Africa to ensure the success of this programme,” Mparuta said.
Dr Elly Karuhanga, the chairman of Uganda Chamber of Mines and Petroleum (UCMP), said the provision of local content policy in the oil and gas sector offers investment opportunities to members in the private sector but they need to form partnerships to be more effective.
“My advice to the local companies is to form partnerships to be effective in providing services in Uganda’s oil and gas industry,” he said.
Oil and gas development are projected to bring to Uganda and Tanzania over $10 billion dollars in the coming years.
It is estimated that between 15- 20 billion dollars will be spent to develop the oil and gas sector in the next five years in the country. About six billion or 30% of the money has been earmarked for the local contractors.
Total’s Tilenga project recently awarded a conditional Letter of Award for the future contracts valued at approximately $2 billion.