Strategic Environmental Assessment (Sea) of Oil and Gas Activities

THE REPUBLIC OF UGANDA

STRATEGIC ENVIRONMENTAL ASSESSMENT (SEA) OF OIL AND GAS ACTIVITIES

IN THE ALBERTINE GRABEN , UGANDA

FINAL REPORT

The Ministry of Energy and Mineral Development, Petroleum Exploration and Production Department (PEPD), in conjuction with the National Environment Management Authority (NEMA) initiated and funded the Strategic Environmental Assessment (SEA) of the oil and gas activities in the Albertine Graben of Uganda, with support from Oil for Development (OFD) Program a bilateral agreement between Government of Uganda and Norway under the project, “Strengthening the management of Oil and Gas Sector in Uganda”.

On behalf of the SEA Team:

Bjørn Kristoffersen (SEA Team Leader)

Eco-Management Support 4306 Sandnes, Norway [email protected]

Jane Bemigisha

ESIPPS International Ltd. Plot 7/9 Clement Hill Road, Hill View Apartments, P.O. Box, 33011, Kampala, Uganda Email: [email protected] ; Web: www.esipps-int.org

Disclaimer

The SEA report has been prepared and delivered by a team of consultants, the SEA Team under the guidance of the SEA Steering Committee. The content of the report reflects the professional judgement and advice of the SEA Team.

Page i FOREWORD

The discovery of oil and gas resources presents great socio-economic prospects for the Albertine Graben and the country at large, but the area is of high ecological and biodiversity significance. This presents various challenges for environmental protection. This document presents a report on Strategic Environment Assessment (SEA) of oil and gas activities in the Albertine Graben of Uganda. The SEA document presents strategic recommendations for policies, plans, and programmes that will guide environmental planning and decision making in the Albertine Graben. The SEA presents a unique opportunity for the country to systematically address environmental management issues pertaining to oil and gas activities in the Albertine Graben in the context of sustainable development.

The SEA was initiated under the leadership of the Ministry of Energy and Mineral Development (MEMD) through its Petroleum Exploration and Production Department (PEPD) and coordinated by National Environment Management Authority (NEMA). The Norwegian Government provided financial support and technical backstopping. A steering committee comprising Petroleum Exploration and Production Department (PEPD), National Environment Management Authority (NEMA), Uganda Wildlife Authority (UWA), Directorate of Environment Affairs (DEA), Ministry of Lands, Housing & Urban Development (MLHUD), Directorate of Water Resources Management (DWRM), Department of Fisheries Resources and Uganda Association of Impact Assessors was instituted to guide the process. The SEA was undertaken and delivered by the SEA consultant team under the guidance of this Steering Committee.

The process was initiated by a high level scoping meeting in April 2010, followed by another high level steering committee meeting in November 2010. The official kick off was in March 2012 and since then the SEA developed through careful analyses and a rigorous consultative and collaborative process. At different stages (phases) and levels (national, local and regional), various stakeholders were involved in identification of key issues and recommendations. Further issues and recommendations were drawn from a scenario analysis process. The SEA was supplemented by Advisory Notes throughout the process. A typical example was the advice on The Petroleum (Refining, Gas Processing, Conversion, Transportation and Storage) Bill, 2012 and the Petroleum (Exploration, Development and Production) Act, 2013. For effective implementation of the recommendations, a monitoring framework has been provided.

This SEA is the first for the oil and gas sector in Uganda and will be a valuable reference and precedent at national and other levels. It is also a beginning of stakeholder partnership on concerted implementation of the recommendations that will guide future plans and decisions regarding sustainable environmental management of oil and gas activities in the Albertine Graben.

The Ministry of Energy and Mineral Development and partners would like to thank all the institutions and individuals that participated in the preparation of this historic document. We call upon all those who participated and future readers to nurture the initiated partnership on sustainable environmental management of oil and gas activities in the Albertine Graben and the wider petroleum sector

.…………………………………………………………………………………

Hon. Eng. Irene Muloni (Minister of Energy and Mineral Development)

Page ii ACKNOWLEDGEMENT

The Strategic Environmental Assessment of oil and gas activities in the Albertine Graben is a product of concerted effort by different individuals and institutions whose contributions are highly acknowledged. The SEA Team would like to thank the institutions and individuals who were consulted and whose views greatly provided value to this document as a building block for future stakeholder partnership on environmental management of oil and gas in the Albertine Graben. The SEA Team would like to acknowledge the invaluable leadership from the Ministry of Energy and Mineral Development through the Petroleum Exploration and Production Department for the successful coordination of the process, most especially Mr. Dozith Abeinomugisha and Eng. Caroline Korutaro. The supportive role of NEMA through the Environment Management Pillar Manager Mr. Waiswa Arnold Ayazika is highly acknowledged. The Steering Committee instituted to guide the SEA process is also highly acknowledged. The Team finally gives special tribute to the Norwegian Government through the Directorate for Nature Management, for providing financial support and technical backstopping.

The Steering Committee consisted of the following members:

• Mr. Dozith Abeinomugisha (Petroleum Exploration and Production Department, Ministry of Energy and Mineral Development), Chairman

• Mrs. Caroline Korutaro (Petroleum Exploration and Production Department, Ministry of Energy and Mineral Development), Secretary

• Mr. Edgar Buhanga (Uganda Wildlife Authority, UWA)

• Mr. Waiswa Ayazika (National Environment Management Authority, NEMA) • Mr. Simon P. Otoi (Uganda Association of Impact Assessors, UAIA)

• Mrs. Teddy Tindamanyire (Directorate of Environmental Affairs, Ministry of Water and Environment)

• Mr. Vincent Byendamira (Directorate of Physical Planning & Urban Development, Ministry of Lands, Housing & Urban Development)

• Mr. Aventino Bakunda (Department of Fisheries Resources, Ministry of Agriculture Animal Industry and Fisheries)

• Mr. Emmanuel Olet (Directorate of Water Resource Management, Ministry of Water and Environment)

Page iii TABLE OF CONTENT

FOREWORD ...... ii ACKNOWLEDGEMENT ...... iii EXECUTIVE SUMMARY ...... ix ACCRONYMS ...... xvi 1 INTRODUCTION ...... 1 1.1 The Geographical Scope of the SEA ...... 2 1.2 The Oil and Gas Sector...... 5 1.3 Structure of the SEA Report ...... 8 2 THE SEA PROCESS AND METHODOLOGY ...... 10 2.1 The SEA Approach ...... 10 2.2 Key Issues ...... 11 2.2.1 Review of documentation ...... 13 2.2.2 Evaluation by expert teams/panels ...... 13 2.2.3 Stakeholder opinions ...... 13 2.2.4 Scenario Analysis ...... 13 2.3 The SEA Phases ...... 14 2.4 Stakeholder Engagement ...... 17 2.5 SEA Organization and Implementation ...... 17 3 BASELINE SETTING ...... 18 3.1 The Regional Setting ...... 18 3.2 The Physical Environment ...... 19 3.2.1 Climate ...... 19 3.2.2 Geology and Soils...... 19 3.2.3 Surface waters ...... 20 3.2.4 Ground Water ...... 23 3.3 The Biological Environment ...... 23 3.3.1 Aquatic flora & fauna...... 23 3.3.2 Terrestrial Flora and Fauna ...... 25 3.3.3 Protected and Sensitive Environments ...... 26 3.4 Socio-Economic Environment ...... 29 3.4.1 Population and Land Ownership tensions ...... 29 3.4.2 Livelihoods ...... 30 3.4.3 Poverty Levels ...... 33 3.4.4 Access to Social Services ...... 33

Page iv 3.4.5 State of the Environment ...... 33 3.4.6 Archaeology and Cultural Heritage ...... 34 4 LEGAL AND INSTITUTIONAL FRAMEWORK. POLICIES, PLANS AND PROGRAMS ...... 36 4.1 Legal Framework ...... 36 4.1.1 The Constitution of Uganda, 1995 ...... 36 4.1.2 The National Environment Act, Cap 153, 2000 ...... 37 4.1.3 The Petroleum Supply Act, 2003 ...... 37 4.1.4 The Petroleum Act, 2013 and Petroleum Bill, 2012 ...... 38 4.2 Regulations ...... 39 4.3 International and Regional Conventions/Treaties, and guidelines ...... 40 4.4 Compliance and Enforcement ...... 40 4.4.1 Compliance ...... 40 4.4.2 Enforcement ...... 41 4.5 Institutional Framework and Capacity ...... 41 4.5.1 General Governance Structure ...... 41 4.5.2 Institutional framework for environment management of oil and gas ...... 44 4.6 Policies, Plans and Programs ...... 45 4.6.1 Policies ...... 46 4.6.2 Plans...... 47 4.6.3 Programs ...... 52 5 INTEGRATION OF KEY ISSUES INTO POLICIES, PLANS AND PROGRAMS ...... 54 6 ASSESSMENT OF STRATEGIC ASPECTS RELATED TO PETROLEUM ACTIVITIES ...... 72 6.1 Description of the development scenarios ...... 73 6.2 Petroleum Activities in Environmentally Sensitive and Protected Areas ...... 76 6.2.1 Assessment of risks and opportunities for current and future petroleum activities .... 77 6.2.2 Recommendations ...... 79 6.3 Co-existence with Other Sectors and Local Communities...... 81 6.3.1 Co-existence with Fisheries ...... 82 6.3.2 Co-existence with Tourism ...... 84 6.3.3 Co-existence with Local Communities ...... 85 6.3.4 Co-existence with Cultural heritage ...... 88 6.4 Institutional Framework and Capacity ...... 92 6.4.1 Environmental management on a national level ...... 92 6.4.2 Coordination between governmental agencies and district/local level ...... 94 6.4.3 Capacity building ...... 96

Page v 6.5 Management of Pollution and Waste ...... 99 6.5.1 Oil spill contingency planning ...... 99 6.5.2 Drilling waste and produced water ...... 103 7 SUMMARY AND TESTING OF RECOMMENDATIONS. MONITORING REQUIREMENTS ...... 107 7.1 Summary and Testing of main Recommendations ...... 107 7.2 Strategic aspects ...... 132 7.3 Differences between the development scenarios ...... 134 7.4 Achievements as compared with SEA Objectives ...... 136 7.5 Performance compared to international best practice ...... 138 7.6 Concluding Advice ...... 139 8 REFERENCES ...... 142

APPENDIX 1: OVERVIEW OF MAJOR REPORTS PRODUCED IN THE SEA PROCESS ...... 147 APPENDIX 2: THE PETROLEUM INDUSTRY AND TYPICAL ASPECTS AND IMPACTS ...... 149 APPENDIX 3: SCENARIO ANALYSIS ...... 163 APPENDIX 4: STAKEHOLDER ENGAGEMENT PROCESS & LOG ...... 184 APPENDIX 5: ENVIRONMENTAL LAWS AND REGULATIONS; INTERNATIONAL AND REGIONAL CONVENTIONS AND AGREEMENTS AND ADDITIONAL POLICIES...... 196 APPENDIX 6: ISSUES REGISTER AND ANALYSIS ...... 218 APPENDIX 7: KEY ISSUES INTEGRATION MATRIX ...... 225 APPENDIX 8: DESCRIPTION OF SCENARIO 2 AND 3 ...... 249 APPENDIX 9: PETROLEUM INDUSTRY IMPACTS IN ENVIRONMENTALLY SENSITIVE AND PROTECTED AREAS ...... 256 APPENDIX 10: RESETTLEMENT POLICY FRAMEWORK SUMMARY FOR OIL AND GAS ACTIVITIES IN AG ...... 259 APPENDIX 11: THE SEA ORGANISATION ...... 263 APPENDIX 12: OUTLINE OF AN INTEGRATED MANAGEMENT PLAN ...... 266 APPENDIX 13: COMMENTS RECEIVED FROM STAKEHOLDERS DURING THE VALIDATION PHASE ...... 269 APPENDIX 14: IMPLEMENTATION PLANNING ...... 277

Page vi LIST OF FIGURES Figure 1.1: The status of oil and gas licensing in the Albertine Graben as of Febraury, 2013 ...... Fehler! Textmarke nicht definiert. Figure 1.2: The wider area with Lake Albert, major roads, district borders and settlements ...... 4 Figure 1.3: The oil supply chain ...... 5 Figure 1.4: Number of wells drilled per year for the period 1938 to 2010 ...... 6 Figure 1.5: Wells drilled and discoveries in the Albertine Graben as of February, 2013 ...... 7 Figure 2.1: The four phases of the SEA process ...... 11 Figure 2.2: Key Issues as basis for strategic discussion ...... 12 Figure 2.3: Identification of Key Issues ...... 12 Figure 3.1: Tectonic setting of the wider area including the Albertine Graben forming the northernmost part of the Western arm of the East African Rift System ...... 20 Figure 3.2: Bathymetry of Lake Albert...... 22 Figure 3.3: Species richness map combining large mammals, birds and woody plants ...... 27 Figure 3.4: Protected Areas located in the wider study area ...... 28 Figure 3.5: Population in Hoima and Buliisa Districts 2002 – 2012 ...... 29 Figure 4.1: Generic institutional framework for environment management of oil and gas ...... 45 Figure 6.1: Scenario matrix ...... 74 Figure 6.2: A Multi-stakeholder partnership model for the Albertine Graben ...... 96 Figure 6.3: Usual tiers for oil spill contingency...... 100

Page vii LIST OF TABLES Table 3.1: Productivity by District for Selected Crops (Yield (MT)/Area (ha)) ...... 31 Table 7.1: Key Issues Group 1- Petroleum related activities in protected and Environmentally Sensitive Areas ...... 107 Table 7.2: Key Issues Group 2 - Co-existence with Local Communities ...... 110 Table 7.3: Key Issues Group 3 - Co-existence with Archaeology and Cultural Heritage ...... 111 Table 7.4: Key Issues Group 4 - Co-existence with Other Industries and Service Providers ...... 113 Table 7.5: Key Issues Group 5 - Co-existence with Tourism ...... 114 Table 7.6: Key Issues Group 6 - Co-existence with Fisheries ...... 115 Table 7.7: Key Issues Group 7 - Sharing of Revenue and Wellbeing between the National and Local/Regional Level (Co-operation) ...... 116 Table 7.8: Key Issues Group 8 - Discharge and Emissions for the Petroleum Industry ...... 118 Table 7.9: Key Issues Group 9 - Waste Management ...... 119 Table 7.10: Key Issues Group 10 - Water Management ...... 121 Table 7.11: Key Issues Group 11- Oil Spill Preparedness on Land and Surface Waters ...... 122 Table 7.12: Key Issues Group 12 - Infrastructure Development in the Region and Transportation of Crude, Products and Construction Materials ...... 124 Table 7.13: Key Issues Group 13 - Institutional Capacity Building (Structure and Functions) ...... 125 Table 7.14: Key Issues Group 14 - Capacity of District Local Governments to Manage Environmental Concerns ...... 126 Table 7.15: Key Issues Group 15 - Development of Legislation and Regulations as well as Standards ...... 127 Table 7.16: Key Issues Group 16 - Land Use and Spatial Planning ...... 128 Table 7.17: Key Issues Group 17 – Transboundary and International Issues ...... 130 Table 7.18: Key Issues Group 18 - Establishment of Transparent Baseline data and Scientific Basis . 131 Table 7.19: Main recommendations within each strategic aspect ...... 132 Table 7.20: Differences between the development scenarios ...... 134

Page viii EXECUTIVE SUMMARY

The Albertine Graben (AG) in the Republic of Uganda holds oil and gas resources with a large potential for commercial development. The goal of the National Oil and Gas Policy (2008) is to use these resources to contribute to early achievement of poverty eradication and create lasting value to society. The objective is to “ensure that oil and gas activities are undertaken in a manner that conserves the environment and biodiversity”.

To support and guide the National Oil and Gas Policy, the Government has decided to undertake a Strategic Environmental Assessment (SEA) for the Albertine Graben (AG). The objective of the SEA is to ensure that environmental and socio-economic concerns contribute to a balanced and sustainable development of the oil and gas sector. The SEA covers the entire Albertine Graben with a focuse on ongoing and planned activities in Exploration Areas 1, 2 and 3A, and the development of a refinery and potential export of products and crude to international markets.

The potential for petroleum resources in Uganda was mapped as early as 1925 and the first well in Uganda was drilled in 1938. The first oil discovery was made at Mputa in 2006 and since then several exploration areas have been earmarked. There are currently, four active Production Sharing Agreements (PSAs). A total of 88 wells have been drilled, of which 76 have been successful discovering more than 3.5 billion barrels of oil in place (STOIIP) as of March 2013. The Albertine Graben is also an area of national and international importance in terms of its outstanding biodiversity and network of protected areas. The area is relatively sparsely populated by pastoral and agro-pastoral communities but there are also several urban centers in the wider region. The SEA is building on a thorough registration and documentation of the baseline setting in the AG comprising a regional overview, the physical environment, the biological environment and the socio- economic environment. This has also been the case when it comes to the legal and institutional framework and relevant Policies, Plans and Programs (PPPs) which have all been registered and discussed in the SEA.

The National Environment Act, Cap 153, requires that the National Environment Management Authority (NEMA) consults closely with relevant lead agencies in the process of the SEA. To fulfill this, NEMA initiated several scoping workshops for the SEA in 2010. These workshops discussed main potential environmental and social challenges, organization of the SEA work, the kinds of decisions needed to be taken during the process and the plans that would be subjected to the SEA. The most challenging concerns were at that time identified as biodiversity loss, land conflicts and transboundary issues.

A Steering Committee for the SEA was appointed and it was decided that the Petroleum Exploration and Production Department (PEPD) under the Ministry of Energy and Mineral Development (MEMD) leads the Steering Committee while NEMA coordinates the activities of the SEA. The Steering Committee developed draft Terms of Reference (ToR) for the SEA activities and these have been the platform for the SEA work. The SEA is based on international best practice adapted to the specific Ugandan conditions. A team of national and international consultants cooperated to undertake and deliver the SEA under the guidance of the Steering Committee.

Page ix The main goals of the SEA were to recommend how to: • Ensure that environmental and sustainability considerations are taken into account during early stages of decision making and integrate these considerations into laws/regulations and relevant PPPs; and • Deal with high level environmental strategic aspects in general for the sector and assess specific future development scenarios in this context. The formal kick-off meeting for the SEA process took place in Kampala on March 15, 2012, initiating the inception phase and with the goal of delivering a final SEA Report early 2013. The SEA was developed during four phases: the screening and scoping (2009 – 2012), the inception, the pre- assessment and the assessment. Main deliverables in each phase are in that order: the Terms of Reference, the Inception Report, the Scenario Analysis, and the Resettlement Policy Framework (RPF) for Oil and Gas Activities in Albertine Graben, the Interim Report and this final SEA Report.

The emerging petroleum sector has a high potential to contribute significantly to Uganda’s economy, industrialization and poverty alleviation plans. However, as the petroleum resources are located both within and in the vicinity of environmentally sensitive and protected areas, this poses a particular challenge to the government, the petroleum industry and the society at large in Uganda. Safeguarding the environment, community cohesion, community health and safety as well as cultural heritage is and will be a challenge in light of the fast developing plans. Land acquisition, resettlement issues and regional security are already under discussion and co-existence challenges, especially with the tourism industry as well as fisheries and the local society, are already emerging. There is concern regarding the capacity of the local communities and whether the society can absorb the expected fast changes in order to take advantage of the benefits. A systematic approach was developed and followed in order to identify the most relevant and significant issues of focus for the assessments and recommendations. More than 135 issues were registered, and these were analyzed and prioritized based on specifically developed significance criteria. 18 Key Issues Groups were highlighted for further evaluations. The Key Issues were established after a comprehensive process involving stakeholder engagement, review of documentation, evaluation by expert teams and a Scenario Analysis. Stakeholder consultation is in general a key concern for a successful SEA process and wherever practical this was arranged on all levels. A stakeholder engagement process and log are attached to the SEA.

The Scenario Analysis focuses on the development of a refinery over four sequential phases, each characterized by activities/key components and related concerns and opportunities. Major concerns are connected to the development in the Murchison Falls National Park, the large amounts of workers to be present in the AG during the construction phases and extensive truck transportation of crude and material on public roads.

A Key Issues Integration Matrix was developed as a tool for dealing with the 18 Key Issues Groups. The SEA Team identified relevant laws/regulations and PPPs connected to each of the Key Issues and has engaged connected stakeholders in a comprehensive dialogue on how to deal with the concerns. Proposed recommendations were developed by the Team prior to the stakeholder discussions and these were adjusted and supplemented based on the outcome of the consultations. The numbers of recommendations within each Key Issues Group were typically in the range of 3-20. The 18 Key Issues groups are:

Page x 1. Petroleum related Activities in Protected and Environmentally Sensitive Areas. 2-6. Co-existence with Local Communities, Archaeology and Cultural Heritage, other Industries and Service providers, Tourism and with Fisheries. 7. Sharing of revenues between the National and the Local/Regional level (Co-operation). 8. Discharges and Emissions from the Petroleum Industry. 9. Waste Management. 10. Water Management. 11. Oil Spill Preparedness on Land and in Surface Waters. 12. Infrastructure Development in the Region and Transportation of Crude, Products and Construction Materials. 13. Institutional Capacity Building; Structure and Functions. 14. Capacity of District Local Governments to Manage Environmental Concerns. 15. Development of Legislation, Regulations and Standards. 16. Land Use and Spatial Planning. 17. Transboundary and International Issues. 18. Establishment of Transparent Baseline Data and Scientific Basis.

The most significant recommendations within each Key Issues Group were tested against the National Oil and Gas Policy (NOGP). The tests were in terms of sustainability and compatibility with focus on the NOGP coverage of the issue, the NOGP strategy how to deal with the issue and NOGP proposed actions.

Furthermore, monitoring requirements for the implementation of the recommendations were proposed with focus on Key Issue identification, monitoring indicators and related responsible institutions.

In addition to dealing with the integration of the 18 Key Issues Groups into laws/regulations and PPPs, the SEA also discusses and provides advice on selected strategic aspects related to the petroleum development. These are: • Petroleum activities in environmentally sensitive and protected areas; • Co-existence with other sectors (fisheries, tourism and cultural heritage) and local communities; • Institutional framework and capacity; • Management of pollution and waste.

Advice is given on a general basis and the most significant recommendations are listed in the SEA.

The strategic aspects are also discussed in relation to specific development scenarios comprising development of a refinery and export pipeline, refinery only, export pipeline for crude only and railway transportation of crude only. The most significant issue is related to the development in the Murchison Falls National Park which is basically the same for all scenarios. The differences based on other aspects vary for each scenario but are altogether marginal.

Page xi

The concluding advice from the SEA process is the following: The emerging petroleum sector has a high potential to contribute significantly to Uganda’s economy, industrialization and poverty alleviation plans. Significant efforts have already been made to use this opportunity to develop the country. The recommendations of this SEA should be integrated into national development planning to ensure that environmental and socio-economic concerns are managed well.

The following points describe the overriding advice based on the recommendation from the SEA process:

• The current planning for development of the petroleum sector has a positive drive. However, it is recommended to moderate the speed of development to ensure balanced capacity building amongst relevant institutions, such as NEMA, to manage the sector. Furthermore, this adjustment would benefit the local district governments and population to adapt to the new sector. • Activities in areas which are formally designated for ecosystem protection and biodiversity conservation should be in accordance with the official protection status of the area. As an example, the National Parks fall into category II of the IUCN classification. The activities should also ensure maintenance of the status quo of the ecosystem and the biodiversity or even improving it. Any decision-making regarding potential future petroleum activities in protected or environmentally sensitive areas need to be based on an Integrated Management Plan according to the principles outlined in Appendix 12. Therefore the detailed content of the Integrated Management Plan should be developed and implemented urgently. • Petroleum exploration activities that are already licensed to take place in protected and environmentally sensitive areas should continue to be based on approved EIAs and relevant national policies and guidelines such as the National Policy on conservation and sustainable development of wildlife resources. In addition such activities should follow international best practice for operations in protected and environmentally sensitive areas.

• The legal framework has to be further adapted to the new petroleum sector. An important element is to further develop the EIA legislation and guidelines according to international best practice. • Co-existence of the petroleum sector with other sectors is of high importance. The petroleum industry should proactively train potential local service providers to reach a high local content. In order to ensure sustainable co-existence with the fisheries, this sector needs stronger regulation and management. The tourism sector is depending on the preservation of ecosystem and recreational functions. Mechanisms have to be established to avoid that the petroleum industry is undermining these values. The sectors should establish common communication platforms where relevant concerns can be resolved. • Local communities will experience opportunities as well as risks. The capacity to adapt to the changing framework conditions has to be a key focus and long-term socioeconomic benefits have to be ensured. A social development plan should therefore be developed. The scenario analysis reveals the presence of large numbers of workforce, especially during construction periods and points at significant in-migration. The planning of urbanization and required

Page xii associated infrastructure has to be advanced in line with petroleum development planning to avoid social tension and lack of capacity of infrastructure. • The Scenario Analysis also reveals that the pressure on public roads is a major concern. Adequate infrastructure to meet the industry needs while ensuring public road safety has to be in place. • Selected areas have been designated for industry development and land take is ongoing. There is concern that resettlement and compensation mechanisms are not adequate. The SEA advices to implement mechanisms in accordance with international best practice. • The National Oil Spill Contingency Plan is under development. Timely preparation and implementation including the relevant training is essential. • Waste management has already received increasing attention. Waste management strategies and facilities covering the existing legacy waste as well as future waste have to be developed in the very near future in line with international best practice. Although produced water is not yet a key concern, it requires dedicated attention already now. • Water management is a major concern. The petroleum industry requires large amounts of water during their operations and this adds to the pressure on water resources in AG. The government should establish water management planning considering the resource needs, sources and associated environmental impacts. • The National Oil and Gas Policy outline the spirit of cooperation and the roles of the government and the oil industry. The oil industry should be encouraged to take an active role in developing technology to meet the challenges of ecologically vulnerable areas and reduce their footprint. • The government has taken a proactive role in communication with neighbouring states regarding transboundary issues such as sharing of petroleum reserves across borders with DR Congo. Further efforts should be made regarding shared oil spill contingency for Lake Albert and the Nile, fisheries management, security of oil and gas installations, public and border security. • The National Oil and Gas Policy outlines goals, strategies and actions for revenue management and transparency. Proper mechanisms and measures should be put in place to ensure that long-term benefits are created and shared fairly with due consideration of the oil and gas bearing regions. • Stakeholder engagement is a key principle of the Ugandan government and the SEA builds on this principle. The disparities in the Ugandan society require attention to ensure that consultation is meaningful and that information is transparent and easily accessible for stakeholders. This will contribute to achieving the social license to operate and minimize the potential for social conflict. • To ensure that the conclusions from the SEA are adequately considered an Implementation Plan should be developed. This should include the collection of and access to adequate baseline data. In addition, the SEA should be updated regularly.

Page xiii Testing was done to establish whether the SEA and connected recommendations met the objectives set for the SEA. The result was that all major objectives were met. Testing against criteria set by the International Association for Impact Assessment (IAIA)) on how to build a good-quality SEA process according to international best practice was undertaken by the Team and these criteria were met as well.

An extensive stakeholder engagement program has supported the SEA process. This program which has engaged individuals, organisations, authorities and others, has initiated good discussions and added valuable information to the process. The Scoping Workshops in April 2010, the Inception Workshops in May 2012 and the Validation Workshop in May 2013 have provided valuable feedback to the assessments.

The structure of the report is presented below:

Chapter 2 explains the SEA process and methodologies used. The cornerstone for the process is the two-sided objective of the SEA focusing on: 1) how to ensure that environmental and sustainability considerations are taken into account and integrated into relevant PPPs during early stages of decision making and 2) how to deal with high level strategic aspects in general and evaluate and communicate strategic aspects for specific future development scenarios.

Chapter 2 further focuses on the term Key Issues which to a large extent is the basis for the SEA assessments and the connected stakeholder engagement process. It explains how the Key Issues are identified and analyzed, refer also to Appendix 6, the Issues Register and Analysis. A Scenario Analysis presented in a separate report, Appendix 3, discusses which concerns are the most important to consider during the different stages of the petroleum development. Stakeholder engagement is the most important part of the SEA and the consultation is explained in Chapter 2.

Another part of the chapter presents the SEA organization and implementation of the process.

Chapter 3 is a short version of the Baseline Setting with focus on regional aspects, the physical - biological environment and the socio-economic environment. A more comprehensive version of this chapter can be found in the Inception Report.

The Legal and Institutional Framework is an important basis to understand and be able to integrate the environmental concerns into the right PPPs. Chapter 4 thus presents the legal framework, relevant regulations to be aware of, international and regional conventions/guidelines, compliance/enforcement matters, institutional framework and capacity, and relevant PPPs.

Chapter 5 and 6 present the discussions and analysis made to cover the two-sided objective of the SEA process. Chapter 5 discusses how to integrate the Key Issues into laws/regulations and relevant PPPs. The Key Issues Integration Matrix, Appendix 7, has been a crucial instrument during the analysis. Chapter 6 deals with selected high level strategic aspects on two levels; on a general level and on a specific development scenario level.

Chapter 7 summarizes the recommendations made and tests whether the SEA process and conclusions are according to expectations and sustainable development of the sector. It also gives advice on how to monitor the implementation of the recommendations.

An overview of the reports produced during the SEA process is presented in Appendix 1.

Page xiv Appendix 2 presents typical aspects and impacts related to the petroleum industry.

Appendix 3 presents the Scenario Analysis process and results elaborated according to different phases.

Appendix 4 comprises the Stakeholder Engagement Process & Log including analysis of the different stakeholder categories and interests, Methodology and approach used in stakeholder engagement and outcome of the consultations.

Appendix 5 elaborates environmental laws and regulations; international and regional conventions and agreements; and additional policies including highlight of the policies that are listed in Chapter 4 but not described in detail.

Appendix 6 presents an issues register and analysis including a comprehensive list of issues, criteria used and significance rating.

Appendix 7 presents the Key Issues Integration Matrix outlining key issues, Relevant PPPs and stakeholders, Laws and Regulations, outcome of the consultations and recommendations.

Appendix 8: Description of Scenario 2 and 3, providing information on overall description of oil field development, overall description of Scenario 2 and 3 and scenario overview matrixes for each development phase.

Appendix 9 highlights petroleum industry impacts in environmentally sensitive and protected areas, listing typical primary and secondary impacts related to petroleum activities in environmentally sensitive and protected areas.

Appendix 10 presents a summary of the Resettlement Policy Framework for Oil and Gas activities in the AG.

Appendix 11 is the Sea Organisation providing a list of members of the Steering Committee and their Institutions and members of the SEA Team and their areas of expertise.

Appendix 12 outlines a proposal for Integrated Management Plan (IMP).

Appendix 13 deals with the comments from the stakeholders received during the Validation Workshop.

Appendix 14 outlines the principles for implementation planning.

Page xv ACCRONYMS

AG Albertine Graben AGEMP Albertine Graben Environmental Management Plan AIA Archaeological Impact Assessment AIDS Acquired Immune Deficiency Syndrome API American Petroleum Institute BAT Best Available Technique bbls/d Barrels of oil per day BEP Best Environmental Practice BMU Beach Management Unit BOPD Barrels of oil per day CBD Convention on Biological Diversity CISCO Coalition of NGOs of Oil and Gas CNOOC China National Offshore Oil Corporation CPF Central Processing Facility CSO Civil Society Organizations DEA Directorate of Environmental Affairs DEO District Environment Officer DFR Department of Fisheries Resources DN Directorate for Nature Management, Norway DRC Democratic Republic of Congo DSIP Development Strategy and Investment Plan DWD Directorate of Water Development DWRM Directorate of Water Resources Management E&P Exploration and Production EA Exploration Area EAC East African Community EAPS East African Petroleum Services Ltd EIA Environmental Impact Assessment EIN Environmental Information Network EIS Environmental Impact Statement EITI Extractive Industries and Transparency Initiative EMS Environmental Management System ERA Environmental Risk Assessment EWT Extended Well Testing FEED Front End Engineering Design FSSD Forest Sector Support Department GIS Geographical Information System GKMA Greater Kampala Metropolitan Area HIV Human Immune Virus HSE Health Safety Environment Page xvi IAIA International Association for Impact Assessment IFAD International Fund for Agricultural Development IFC International Finance Corporation IFPRI International Food Policy Research Institute IMP Integrated Management Plan IOR Improved Oil Recovery IPP Integrated Power Project IR Inception Report ITCZ Inter-Tropical Convergence Zone IUCN International Union of Conservation of Nature LCV Local Council, level V LG Local Government LPG Liquefied Petroleum Gas m.a.s.l Metres above sea level MAAIF Ministry of Agriculture, Animal, Industry and Fisheries MEMD Ministry of Energy and Mineral Development mEq Milli equivalent MFNP Murchison Falls National Park MGLSD Ministry of Gender, Labour and Social Development MLHUD Ministry of Lands, Housing and Urban Development Ms Manuscript MSL Mineral Services Ltd MT Million Tonnes MTWA Ministry of Tourism, Wildlife and Antiquities MWE Ministry of Water and Environment MUIENR Makerere University Institute of Environment and Natural Resources NAFIRRI National Fisheries Resources Research Institute NATOIL Uganda National Oil Company NCEA Netherlands Commission for Environmental Assessment NDP National Development plan NEAP National Environmental Action Plan NEMA National Environment Management Authority NEMP National Environment Management Policy NE-SW North East-South West NFA National Forestry Authority NGO(s) Non-Governmental Organization(s) NINA Norwegian Institute for Nature Research NOGP National Oil and Gas Policy NORM Naturally Occurring Radioactive Materials NOSCP National Oil Spill Contingency Plan NOx Nitrogen Oxide

Page xvii NP National Park NTMP National Transport Master Plan OPEC Organisation of Petroleum Exporting Countries OPM Office of the Prime Minister OfD Oil for Development Program, Norway OSCA Oil Spill Contingency Analysis PAPs Project Affected Persons PAU Petroleum Authority of Uganda PEAP Uganda Poverty Eradication Action Plan PEPD Petroleum Exploration and Production Department PM Particulate Matter PMA Plan for Modernization of Agriculture PPP(s) Policies, Plans and Program(s) PSA Production Sharing Agreement QA Quality Assurance RAP Resettlement Action Plan RBP Regulatory Best Practice RPF Resettlement Policy Framework SEA Strategic Environmental Assessment SC Steering Committee SOx Sulfur Oxide SWL Static Water Level STD Sexually Transmitted Diseases STOIIP Stock Tank Oil Initially in Place ToR Terms of Reference UAIA Uganda Association of Impact Assessors UBOS Uganda Bureau of Statistics UGX Ugandan Shilling UNBS Uganda National Bureau of Standards UNDP United Nations Development Program UNEP United Nations Environment Program UNESCO United Nations Educational, Scientific and Cultural Organisation UNFCCC United Nations Framework Convention on Climate Change UNRA Uganda National Roads Authority UPDF Ugandan People’s Defence Forces UWA Uganda Wildlife Authority WR Wildlife Resources

Page xviii 1 INTRODUCTION

The Albertine Graben in the Republic of Uganda is endowed with oil and gas resources with large potential for commercial development. The goal of the National Oil and Gas Policy (2008) is to use the country’s oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to society. The operational objective pertaining to the environment is to; “ensure that oil and gas activities are undertaken in a manner that conserves the environment and biodiversity”. To support and guide this National Oil and Gas Policy, the Government decided to perform a Strategic Environmental Assessment (SEA) for the Albertine Graben.

The objective of the SEA was to ensure that environmental issues associated with the oil and gas sector are considered and integrated into laws/regulations, major decisions connected to Policies, Plans and Programs (PPPs) and specific strategic aspects related to petroleum activities at the earliest stage in order to achieve the goals of the National Oil and Gas Policy.

The SEA is in accordance with the Ugandan understanding aiming at supporting sustainable development which defines the environment to comprise the physical environment, cultural heritage and socio-economic effects caused by petroleum development in the Albertine Graben. Institutional matters related to infrastructure, spatial planning, and emergency response, capacity building, etc., are included where relevant.

The Albertine Graben is a sparsely populated area of national and international importance in terms of its outstanding biodiversity and network of protected areas. As this area also harbors the country’s most promising petroleum reserves, this poses a particular challenge for oil and gas industry in Uganda.

The SEA shall contribute to sustainable use of natural resources and goods derived from the Albertine Graben by maintaining the structure, functioning and productivity of the ecosystems of the area as a basis for long term value creation and sustained livelihoods.

The SEA process shall further contribute to a balanced and sustainable development of the petroleum sector, and shall focus on the following principles:

• Ensure public participation to make sure that concerns and expectations are considered in the decision process; • Ensure that all relevant major issues are addressed at the earliest stages of the oil and gas development and that advice is given in the process of decision making; • Establish a common understanding and joint baseline for the SEA; • Identify key issues to be dealt with in order to ensure a focused discussion; • Identify environmental related opportunities and risks associated with various scenarios for the petroleum development and give advice on enhancing opportunities and minimizing risks; • Outline mitigation and monitoring requirements and objectives that establish best practice and ensure effective impact management for future oil and gas development; • Use efficient and well developed methodologies for the SEA;

Page 1 • Establish and implement a transparent SEA process which also ensures predictability for sustainable involvement of the international oil industry which will in turn apply best international practices.

1.1 The Geographical Scope of the SEA

The SEA covers the entire Albertine Graben with a focus on ongoing and planned petroleum license areas, which comprise Exploration Areas 1 (Pakwach Basin), 2 (Lake Albert Basin) and 3A (Semliki Basin) in addition to the development of a proposed refinery and the transportation of crude from the petroleum production facilities to the refinery. Figure 1.1 shows the status of licensing in the Albertine Graben. The SEA is also considering scenarios where all oil production is exported either via pipelines or railway. The Albertine Graben forms part of the Western arm of the East Africa Rift System. The Graben is a unique physiographic region comprising of the rift escarpments, the block of the Rwenzori Mountains and an extensive graben. The area has several lakes including Albert, Edward and George.

The Albertine area is a landscape of great relief contrast with both the lowest elevation in the country of about 620 metres above mean sea level and the highest elevation in the country of about 5100 metres above mean sea level on the Magherita peak in the Rwenzori Mountains. The Graben extends for a total distance of over 500 km with widths averaging 45 km.

The Albertine Graben is one of the most important locations for the conservation of mammals, birds and freshwater fish in Africa. It has a variety of geological and biological features with complex ecosystems and high biological diversity. It is a home to many plants and animal species that are endemic for the region and it is the most important area for bird endemism in Africa. A wide variety of ecosystems and species are known to exist in the region. The Albertine Graben has got a number of protected areas.

The Graben is sparsely populated because it dominantly has a hot and dry climate. The majority of the inhabitants are pastoral and agro-pastoral communities. A number of people live in fishing villages on the shores of lakes Albert, Edward and George.

Due to the oil development activities in the region, a spiral of urbanization processes is taking place along the roads in the region. There are several population centres in the area (Figure 1.2) and there is increased growth of these old towns. The oil exploitation and development activities will most likely create further urbanization processes.

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(Source: PEPD) Figure 1.1: The status of oil and gas licensing in the Albertine Graben (as of February 2013)

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(Source: NEMA, 2012) Figure 1.2: The wider area with Lake Albert, major roads, district borders and settlements

Page 4 1.2 The Oil and Gas Sector

The petroleum industry is divided into three levels: upstream, midstream, and downstream which encompass the main segments of the supply chain. The upstream level includes the exploration, drilling, and production of crude oil. The midstream level includes the transportation and trading of crude oil to refineries and refining. The downstream level refers to the distribution and marketing of crude oil to wholesalers and retailers. Figure 1.3 below illustrates a typical supply chain.

The largest volume of products of the industry is fuel oil and petrol. Petroleum is also the raw material for many chemical products, including pharmaceuticals, solvents, fertilizers, pesticides, and plastics. Appendix 2 presents more information about the petroleum industry and typical aspects and impacts related to the various upstream petroleum activities.

In Uganda, the petroleum potential was first documented by A.J. Wayland in 1925, who mapped oil seepages at that time. In 1938 the first well, Waki-B1, was drilled in the Butiaba area confirming oil shows. Since then, petroleum potential of the Albertine Graben was known but it was not until the 1990s that an increased and targeted focus on exploration was initiated.

Figure 1.3: The oil supply chain

By the early 2000s, Uganda was seeking domestic petroleum reserves in response to rising oil prices. The Albertine Graben has since been subdivided into ten Exploration Areas. The Exploration Areas include Blocks 1 and 5 located to the north of Lake Albert, Blocks 2, 3A, 3B, 3C and 3D on and around Lake Albert, while Blocks 4A, 4B and 4C are located around lakes Edward and George in the southern part of the Graben (Fig. 1.5). Four out of these ten Exploration Areas are currently licensed to oil exploration companies for exploration, development and production.

In 2002, Heritage Oil and Gas Ltd drilled the first exploratory well, Turaco-1 in Block 3 and two more wells; Turaco-2 and 3 until 2004. In 2005 Hardman Petroleum Resources Pty drilled the Mputa-1 well

Page 5 in EA 2 and tested in 2006. This well finally provided the break-through and tested a combined total of 1100 bbl/d. Since then exploration activities have increased significantly (Fig. 1.4) and Uganda is preparing for managing a petroleum sector.

In 2006, Heritage Oil and Gas Ltd drilled the Kingfisher-1 well in EA3A and estimated Kingfisher resources to 600 million barrels of crude in place. Heritage's partner Tullow Oil, which had in the meantime bought Hardman Resources, stated that the Albertine Basin as a whole contained over one billion barrels. The Kingfisher-1 well flowed over 10,000 bbl/d of oil. The tested oil predominantly reveals medium crude with an API around 30, a high wax content (16 – up to 30 weight %) and a pour point around 40° C. These properties imply pumping during production and continuous heating of the transport infrastructure to ensure flow. Power supply as well as overall energy efficiency are therefore of key importance to be able to make use of the crude. A consumer for the wax also has to be considered.

(Source: PEPD, 2012) Figure 1.4: Number of wells drilled per year for the period 1938 to 2010

Oil exploration and production activities to date indicate that the oil potential in the Graben is promising. For example, out of the 88 exploration and appraisal wells drilled by to date, 76 were successful.

In summary the characteristics for the Albertine Graben are: • Total acreage of about 23.000km2 • First oil discovery made at Mputa in 2006 • 20 oil/gas discoveries made to date • More than 3,5 billion barrels of STOIIP (Stock Tank Oil Initially in Place) as of March 2013 • Estimated 1 billion barrels of recoverable oil equivalent • 4 active Production Sharing Agreements (PSAs) • TOTAL, Tullow, CNOOC hold licenses Page 6 • Four out of ten exploration areas in the Albertine Graben have been licensed to international oil companies

(Source: PEPD, 2012) Figure 1.5: Wells drilled and discoveries in the Albertine Graben as of February, 2013

All discoveries have so far been made within the Lake Albert petroleum system while the Rhino Camp and Lake Edward petroleum systems have not yet been proven.

Significant exploration and appraisal activities are ongoing and CNOOC already holds a conditional production license for Kingfisher. According to the current planning earliest production is feasible for end 2016/2017 but various issues have to be resolved in the meantime. These include, among others, agreement and approval of field development plans, infrastructure and facilities, adequacy of the EIA process, waste management solutions, capacity and efficiency in various governmental institutions at various levels to manage the sector properly as well as implementation of adequate oil spill contingency.

The significant scale of oil discoveries since 2006 drives the expectations of the petroleum resources contributing significantly to poverty eradication, job and revenue creation. Various alternatives of petroleum development and use along the value chain are currently under discussion.

Chapter 2.2.4 and 6.1 provides an overview of various potential scenarios and development phases for upstream and midstream activities. In any case, significant development has to take place in the Albertine Graben to produce the oil and gas resources and make use of it, whether within Uganda or for export. Full field development including gathering lines, processing and storage facilities will be necessary for any of the options. Page 7 This implies significant development and improvement of associated infrastructure such as roads, waste management facilities, oil spill contingency, medical facilities for emergency response as well as adequate structuring of the involved governmental institutions and capacity building to manage the petroleum sector. Land ownership and tenure, compensation and the already started land speculation have to be tackled to avoid social disruption and corruption. An important aspect is also the overall security situation within the region, the role of the army, police and potential private security forces and associated safeguarding of the rights of the local population. Further information is given in Chapters 5 and 6.

1.3 Structure of the SEA Report

An overview of the reports produced during the SEA process is presented in Appendix 1.

Appendix 2 presents typical aspects and impacts related to the petroleum industry.

Chapter 2 further focuses on the term Key Issues which to a large extent is the basis for the SEA assessments and the connected stakeholder engagement process. It explains how the Key Issues are identified and analyzed, refer also to Appendix 6, the Issues Register and Analysis. A Scenario Analysis presented in a separate report, Appendix 3, discusses which concerns are the most important to consider during the different stages of the petroleum development. Stakeholder engagement is an important part of the SEA and the consultation is explained in Chapter 2.

Another part of the chapter presents the SEA organization and implementation of the process.

The Legal and Institutional Framework is an important basis to understand and be able to integrate the environmental concerns into the right PPPs. Chapter 4 and Appendix 5 thus presents the legal framework, relevant regulations to be aware of, international and regional conventions/guidelines, compliance/enforcement matters, institutional framework and capacity, and relevant PPPs.

An overview of the reports produced during the SEA process is presented in Appendix 1.

Page 8 Appendix 2 presents typical aspects and impacts related to the petroleum industry.