An aerial view of the Kingfisher oil field. Ugandan companies earned Shs3.5 trillion in the exploration stage of oil and gas/Business Focus photo.
The Cabinet has finally given green light to the Energy Ministry to grant exploration licenses and sign production-sharing agreements (PSA) for two oil exploration blocks in the Albertine Graben.
According to the Minister of state for National Guidance, Godfrey Kabbyanga, a cabinet meeting held on Monday this week approved two oil companies following successful negotiations.
Kabbyanga says that the approved oil firms include DGR Energy Turaco Uganda SMC Limited which is a unit of Australia’s DGR Global and state-owned Uganda National Oil Company (UNOC).
DGR, which owns another exploration license in areas of Kanywataba, will be operating from Turaco block which is a 637-square kilometre exploration area located in Albertine Graben near the border with Congo in Ntoroko district.
Heritage Oil- a British company had done some exploration in the area but abandoned it in 2004. The block reverted to the government as per the laws.
On the other hand, UNOC will be undertaking operations in Kasuruban exploration area that stretches over 1,285 square kilometres stretching between Buliisa and Packwach districts. This license was previously held by Tullow which made some discoveries. Tullow did not however go further with more drilling. The Anglo-Irish firm relinquished the block to the government. It is alleged that Tullow may have abandoned the block on discovering that the amount of crude there would not be commercially viable.
The two exploration areas given out are part of five blocks the government auctioned in the second licensing round launched in 2019. The three which have not been given out are; Avivi (1026km2), Omuka (750km2) and Ngaji (1230km2).
Frank Mugisha, the Ministry of Energy assistant commissioner and licensing manager for upstream petroleum management says the two firms will initially get two-year exploration licenses for the blocks.
Mugisha says that for DGR the license can be extended for two more years while UNOC’s license can be extended to six years.
He adds that UNOC licenses are given a long lifeline given the nature of the exploration and the fact that there is limited data on the block among other factors.
He however adds that UNOC’s license is preconditioned as the company is required to find a suitable joint venture partner within the first exploration period.
In 2015, Uganda held its first oil block auction, which included six 2,674 square kilometer-sized exploring regions. Before that, the country distributed blocks based on who arrived first.
Armour Energy Limited of Australia and Oranto Petroleum of Nigeria, took part in the first round, and they both later signed Production Sharing Agreements (PSAs) with the government.
In 2019, the second round was announced attracting Total, DGR Global Limited, Uganda National Oil Company Limited and a joint venture of PetroAfrik Energy Resources East Africa Ltd, Uganda and Niger Delta Petroleum Resources Ltd from Nigeria. However, only two oil and gas firms submitted bids and both have been granted licenses.
The Minister of Energy and Mineral Development, Ruth Nankabirwa in January 20202 announced that her ministry was preparing to launch two licensing rounds in May 2023. She said the award of new exploration licenses will unlock additional discoveries w and attract new investment. So far, 40% of the Albertine region has been explored. Uganda first discovered commercial reserves of crude oil in the Albertine Graben in 2006 with reserves of 6 billion barrels out of which 1.4 billion barrels are recoverable.
Total and China’s CNOOC jointly own the existing fields but commercial production has been continually postponed. According to officials, the first oil is expected to be extracted from the ground in 2025.
-URN
