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Executive Perspective on Uganda’s First Licensing Round

Wednesday, February 25, 2015

Uganda made two exciting announcements for its petroleum industry in the past week regarding the long-planned refinery, and today, the official launch of its much anticipated first licensing round came. In an evening call from her Kampala home, Minister of Energy Irene Muloni spoke to Petroleum Africa by telephone and elaborated on the country’s latest news and future plans.

Uganda historically licensed blocks through direct negotiation but since the country now has a proven and significant petroleum system, Muloni says “there is a lot of interest and therefore a need for transparency in the process” which she expects to be very competitive. “Before we did not have the same concerns that we do now that have we proven oil reserves.” This first round will put in to play Uganda’s National Oil and Gas Policy (2008) and its Petroleum (Exploration, Development and Production) Act 2013, both created to make the country’s petroleum sector more transparent.

Muloni elaborated on the attractiveness of Uganda as an investment destination saying that “the cost of finding crude in Uganda is less than $1 barrel, which is very, very competitive.” She also said that already in the Albertine Graben there are 65 billion barrels of proven oil resources in place and 500 Bcf of natural gas, and that’s with exploration work only conducted in under 40% of the basin.

Muloni told Petroleum Africa that “the blocks on offer include both previously unlicensed acreage as well as acreage relinquished by former operators at the end of certain exploration phases as required by their contracts.”

Earlier in the day Ugandan officials issued a press release detailing the blocks on offer. The six blocks are all located in the Albertine Graben and include the Ngassa in Hoima District, Taitai and Karuka in the Buliisa District, Ngaji in the Rukungiri, and Kanungu Districts, Mvule in the Moyo and Yumbe Districts together with Turaco and Kanywantaba in Ntoroko District. These blocks have both seismic and well data which were acquired by oil companies previously licensed in these areas. Stratigraphic licensing will be applicable to some of these blocks. The Ngassa, Taitai, Karuka, Turaco, and Kanywantaba blocks all saw exploration by Tullow Oil. The Mvule and the Ngaji were part of acreage held by Tower Resources and Dominion Petroleum respectively.

The release issued by Ugandan authorities on the licensing round revealed that the government has undertaken resource and risk assessment of the areas proposed for licensing, developed a data room, and is making available data packages to prospective investors in preparation for this licensing round.

Uganda’s Ministry of Energy and Mineral Development will publish a Request for Qualification (RFQ) for the First Licensing Round for Petroleum Exploration in Uganda on February 26.

The qualified firms from this RFQ will be issued a detailed request for bids together with the Modal Production Sharing Agreement (PSA) for the specific blocks. Companies submitting the best evaluated bid for each of the blocks will proceed to negotiations with government prior to signing production sharing agreements. The licensing round is expected to conclude with the award of licenses by the end of 2015.

The Ministry will make available more detailed information on the blocks during the upcoming 7th East African Petroleum Conference and Exhibition which will be held in Kigali, Rwanda from March 4-6.

On the refinery, Muloni says she expects negotiations with the consortium led by Russia’s Rostec to conclude by the end of next month. When asked if there were concerns about Rostec’s ability to carry-out the project given sanctions on Russia by the EU, US and Canada, she said “these are all issues we will cover during final negotiations. The consortium includes non-Russian companies from Korea and Japan with a great deal of experience in the Refining sector, so we hope these issues will be addressed during the negotiations.” She also added that the SK Energy-led consortium was also an option that could be pursued if necessary.

For more on exploration, production, refining, the planned pipeline and capacity building, be sure to read the full interview with Minister of Energy Irene Muloni in Petroleum Africa’s upcoming March 2015 issue.


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