By Daniel Muwanguzi,
NATIONAL
Cabinet of Uganda has on Monday this week approved two oil companies following successful negotiations, the state minister for national guidance Godfrey Kabbyanga Baluku reported.
According to the Minister, the ministry of Energy has been directed to grant exploration licenses and sign production-sharing agreements (PSA) for two oil exploration blocks in the Albertine Graben
The approved oil firms include DGR Energy Turaco Uganda SMC Limited, 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.
This is the same area where a British oil company, Heritage Oil had done some exploration but abandoned it in 2004 under unclear circumstances. The block reverted to the government as per the laws.
UNOC will be undertaking operations in Kasuruban exploration area that stretches over 1,285 square kilometres stretching between Buliisa and Packwach districts.
It should be recalled that this license was previously held by Tullow which made some discoveries however, the company withdrew from drilling relinquishing 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).
The Ministry of Energy assistant commissioner, Frank Mugisha says the two firms will initially get two-year exploration licenses for the blocks.
Mugisha who is also the licensing manager for upstream petroleum management stressed that the license for DGR will be extended for two more years while UNOC’s license can be extended to six years.
“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. The license is preconditioned as the company is required to find a suitable joint venture partner within the first exploration period,” he explained
Uganda held its first oil block auction in 2015, which included six 2,674 square kilometer-sized exploring regions. Before that, the country distributed blocks based on who arrived first.
Background
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 2022 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.
