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Nigerian Firm To sink Shs113bn In Uganda’s Oil Sector

The Government of Uganda Tuesday signed two Production Sharing Agreements (PSA) and issued two Licenses for Petroleum Exploration, Development and Production over the Ngassa Contract Area with Oranto Petroleum Limited from Nigeria.

Speaking during the Ceremony held at Amber House, Eng. Irene Muloni, Minister of Energy and Mineral Development said, “Oranto Petroleum Limited has today been granted two Petroleum Exploration licences for the Shallow and Deep plays in the Ngassa block. The Licences have been stratigraphically delineated. This is the first time Uganda and indeed the East African region is undertaking Stratigraphic licensing, where two licenses are issued vertically over the same block. Stratigraphic Licensing is provided for in the Petroleum Act 2013. ”

Muloni said that the two Exploration licenses are covering 410 sq. Kilometer for four years split into two periods of two years each.

She added that each PSA has minimum Work obligations together with the minimum Exploration Expenditure.

For example,  during the first two years, the company will reprocess existing seismic data, acquire new seismic data, carry out geological and geophysical studies as well as feasibility studies for drilling from the lake with a minimum expenditure of USD 2.4m.

During the subsequent two years, Muloni revealed that  the company will acquire more seismic data, construct a drilling facility and drill at least one well on the lake at a minimum expenditure of USD 29m. This means the company is set to invest up to Shs112.8bn in Uganda’s oil and gas sector.

Muloni added that the PSA also includes payment of Royalty based on the Gross Total Daily Production in Barrels of Oil Per Day (BOPD). For both PSAs, the rate of royalty ranges from 5.5% to 18%.

Cost Recovery limit for Petroleum is set at 65%.

Robert Kasande, Ag. Permanent Secretary added that the licensing of new upstream players together with the progress made on the Front End Engineering Designs (FEED) for the (9) Production Licenses, refinery negotiations and the East African Crude Oil Pipeline (EACOP) project will bring accelerated Oil and Gas activities in the country by the end of next year.

The Ngassa block, which was initially part of EA2 which is licensed to Tullow, is covered with good quality 2D and 3D seismic data acquired between 2003 and 2008. Since the structure lies entirely under the lake, two deviated wells, Ngassa-1 and Ngassa-2 were drilled on land at the periphery of the main structure between 2007 and 2009 respectively in order to access the reservoirs.

Both gas and oil shows were encountered by the two wells. Due to relinquishment obligations in the PSA, Tullow relinquished this part of EA2. However, a large part of the structure still remains untested, hence the need to relicense it.

The Ngassa block has been stratigraphically delineated. Stratigraphic licensing is aimed at ensuring that the full potential of the acreage is explored since companies may be inclined to relinquish shallow reservoirs as they tend to be more gas prone in the Albertine Graben, as opposed to the deep reservoirs which are more oil prone.

The signing of the PSAs and Licence award was cleared by Cabinet and the Ministries of Finance, Planning and Economic Development together with that of Justice and Constitutional Affairs.

Uganda’s first licensing round covered six blocks with a total acreage of 2,674 Km2 in the Albertine Graben, Uganda’s most prospective sedimentary basin.

Out of the nineteen (19) applicants at the Request for Qualification Stage, sixteen proceeded to the Request for Proposal stage and four emerged successful and proceeded to the negotiations stage.

This first licensing round was undertaken in line with the National Oil and Gas Policy for Uganda (2008) and in accordance with the Petroleum (Exploration, Development and Production) Act 2013.

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