Out-Law / Your Daily Need-To-Know

Out-Law News 2 min. read

Uganda launches first petroleum exploration licensing round since 2007


The first competitive licensing round for petroleum exploration in Uganda in eight years has been announced by the government.

Uganda’s Ministry of Energy and Mineral Development (MEMD) said the round will cover six blocks in the Albertine Graben region, comprising a combined area of more than 2,900 square kilometres, in a “proven prospective sedimentary basin”.

The six blocks are Ngassa, Taitai & Karuka, Ngaji, Mvule, Turaco and Kanywantaba. The ministry said all blocks have seismic and well data acquired by oil companies previously licensed in the area. Stratigraphic licensing will be applicable to some of the blocks, the ministry said. Packages of data relating to the areas will be made available to prospective investors, the MEMD said.

Energy and mineral development minister Irene Muloni said Uganda has an estimated 6.5 billion barrels of in place petroleum resources from exploration work in less than 40% in the Albertine Graben.

However, Muloni said “less than 10% of the Albertine Graben is currently licensed and the six blocks targeted for this maiden licensing round have good data coverage”.

Muloni said the government is “committed to a transparent process” in developing the country’s oil and gas sector, in line with  Uganda’s 2008 national oil and gas policy (56-page / 544 KB PDF) and the Petroleum (Exploration, Development and Productions) Act of 2013 (142-page / 736 KB PDF).

Muloni said no areas had been licensed for exploration since 2007 to allow the government to “put in place the required legal, regulatory and institution framework to ensure an open, efficient and competitive licensing process”.

George Booth, international oil and gas partner at Pinsent Masons, the law firm behind Out-Law.com, said: “Uganda is operating in a highly competitive global marketplace to attract exploration commitments from the industry. The ability of the investor to understand, evaluate and mitigate above surface risk will be a fundamental part of its decision whether to participate.”

Booth said: “The application of the Upstream Act 2013 and the capacity of the authorities to regulate, together with the terms of the model production sharing contract, will be subject to considerable scrutiny by possible entrants into the Ugandan upstream sector."

The MEMD plans to publish a ‘request for qualification’, after which qualifying prospective investors will receive a detailed request for bids, together with a ‘modal production sharing agreement’ for the specific blocks. Detailed information on the blocks will be released during the 7th East African Petroleum Conference and Exhibition to be held in Kigali, Rwanda, in early March.

“Companies submitting the best evaluated bid for each of the blocks will proceed to negotiations with government prior to signing production sharing agreements,” the MEMD said. Licences are expected to be awarded by the end of this year.

The MEMD said the “main objectives” of the licensing process are “to offer exploration and production investment opportunities in the country’s oil and gas sector, establish and increase the country’s resource base, enhance sustainability for petroleum production and thus contribute to the country’s economy through generating revenue to support other productive sectors of the economy”.

Three international oil companies are currently licensed in the Albertine Graben region. The companies are Tullow Uganda Operations Pty Limited, Total E&P Uganda and China National Offshore Oil Corporation Uganda Limited.

According to the MEMD, 21 oil and gas discoveries have been made in Uganda to date, four of which were relinquished to the government. The MEMD said appraisal has been completed of 17 of the 21 discoveries.

Each of the companies currently licensed for petroleum exploration has signed a memorandum of understanding (MOU) with the Ugandan government for commercialisation of discovered resources. The MOU “includes development of a 60,000-barrels-per-day refinery, use of crude oil to generate electricity and export of crude oil,” the MEMD said.

Uganda’s refinery project is being developed on a public private partnership basis. A consortium led by Russia’s RT Global Resources, a subsidiary of the Russian Technologies State Corporation, has been selected as the preferred bidder and lead investor in the refinery, which is expected to start commercial production in 2018.

The acquisition of land for the refinery is “in the final stages”, the MEMD said. Meanwhile, “plans to develop other supportive infrastructure on a national and regional level are also under way”, the MEMD said.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.