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Uganda's Second Licensing Round

" To increase the oil reserves of the country and indeed position East Africa as the real destination for oil and gas investment, Uganda will conduct a second licensing round for oil and gas exploration blocks."

Hon. Irene Muloni, Minister of Energy and Mineral Development, Uganda May 2019

UPDATE

27.05.19: UIOGS to host an exclusive round up on all submissions on the opening day (25 September)

 

In May 2019, Hon Eng Irene Muloni, Minister of Energy and Mineral Development, officially announced the second licensing round in respect of petroleum exploration, development and production in Uganda.

The following is taken from her official statement, delivered 8th May 2019 in Kenya:

I particularly want to inform you fellow participants, our dear investors and the rest of the world that the Republic of Uganda through the Ministry of Energy and Mineral Development is working with Member States and the Oil Companies to commercialise the Oil and Gas resources in the country and region.

To increase the oil reserves of the country and indeed position East Africa as the real destination for oil and gas investment, Uganda will conduct a second licensing round for oil and gas exploration blocks.

This licensing round covers five blocks in the Albertine Graben which is the most prospective area for petroleum exploration, development and production in Uganda. I, therefore, thank all of you for turning up to listen to my announcement of this important milestone and investment opportunity in the country and the region.

The licensing round is driven by a number of factors including but not limited to the following: 

  • Establishment of additional petroleum resources and reserves to the current confirmed 6 Billion Barrels of Oil out of which about  1.4 Billion Barrels are recoverable; and 500 Billion Cubic feet of non-associated gas. The additional resources are to ensure sustainability of oil production and economic viability of the Refinery and the East African Crude Export Pipeline.
  • To take advantage of the current high crude oil price. To date, the price of crude oil at the world market is above USD 60 and is progressively rising. Typically, licensing of acreage during this environment would attract a large spectrum of oil companies including moderate to big ones and subsequent achievement of competitive work programs and fiscal terms.  
  • Considerable interest in investing in the Country’s oil and gas sector.  Numerous investors have expressed interest in investing in the sector and it is important the country considers them. 
  • Conducive investment climate, minimal geological and commercial risks. Most areas of the Albertine Graben have been greatly de-risked in terms of geological, market, transportation and infrastructure.
  • Existence of comprehensive and robust legal, regulatory and institutional frameworks which guarantee certainty to investors. 
  • Promotion of National Content. The exploration licensing is envisaged to create several opportunities including national participation through service provision and employment.
  • The experience gained from conducting the 1st Licensing Round and the existence of the State-of-the-Art Data room which are pivotal for a successful licensing round.

BACKGROUND

Prior to 2006 when the first commercial oil and gas discovery was made in Uganda, the risk of exploration was very high. Therefore, attracting investment in an area with no proven petroleum resources was challenging. The country therefore adopted an open-door policy for licensing whereby Government would hold one to one negotiation with the investors who expressed interest.  

Following the de-risking of the Albertine graben through discovery of commercial oil in 2006, the country formulated the National Oil and Gas Policy in 2008. The Policy recommended a comprehensive legal and regulatory and institutional framework reform to address the entire petroleum value chain and one of the objectives of the Policy was the adoption of competitive licensing. 

Consequently, the Government conducted a successful First Licensing round from  2015 to 2017 which resulted in the grant of three exploration licenses. Oranto Petroleum Limited was awarded two licenses i.e., Ngassa shallow play and Ngassa Deep play while Armour Energy Limited was awarded Kanywataba block. The companies are currently implementing the agreed work programs as spelt out in the signed Production Sharing Agreements.

 

CURRENT STATUS OF LICENSING

The country, to date boasts of nine production licenses. Total E&P Uganda B.V. holds three Production licenses over four fields issued in 2016 and the company’s application for additional three production licenses is under review by Government. Tullow Uganda Operation Pty holds five Production licenses over nine fields issued in 2016. While CNOOC Uganda Ltd holds one Production license over the Kingfisher field issued in 2012.

On the other hand, the country boasts of three exploration licenses. Armour Energy Ltd holds an exploration license over the Kanywataba block issued in 2017 while Oranto Petroleum Ltd has two stratigraphic licenses over Ngassa shallow and deep plays.

The licenses areas represent about 10% of the Albertine Graben while 90% is not licensed.

 

INVESTMENT CLIMATE IN OIL AND GAS SECTOR

  • The country is peaceful and secure, thanks to the NRM Government under the able leadership of H.E YK Museveni.
  • The investment climate is very conducive offering double digit returns on investments in reasonable time. Some of the incentives which enable Uganda to be an attractive investment destination include: 
  • (i)    Minimal geological risks. Most of the basins in the country have significantly been de-risked and geological success rate of finding oil is at more than 85% while the cost of finding a barrel of oil is about USD 1 which is below world average of more than USD 2.
  • (ii)    Favourable legal, regulatory and institutional frameworks.  These frameworks guarantee confidence and certainty to investors to invest their risk capital in the oil and gas sector.
  • (iii)    Fully Liberalized economy and foreign exchange market. There are no restrictions to 100% foreign ownership of investments in Uganda. The Uganda's shilling is fully convertible and has remained stable over the past years. The foreign exchange market is now wholly liberalized following a move by government, effective July 1997 to liberalize capital account transactions. Uganda is now one of about only five countries in the whole of Africa that have no restrictions on capital amount transfers. 
  • (iv)    Unlimited access technical information showing active petroleum systems. Ownership of the petroleum data resides with Government. Access to this information within the basins earmarked for licensing is not restrictive, some of which can be acquired after signing a confidentiality agreement and payment of a fee to cover administrative costs.  
  • Relatively good infrastructure in the country. Every part of the Albertine Graben is reachable by road and air. Government, however, is upgrading most of the road network to first class Tarmac and constructing an international airport in the Albertine Graben in preparation for the first oil expected in the next three years.
  • A young educated population offering cheap labor that can be tailored to your needs.
  • A warm receptive population that supports investments in the country.

PROPOSED LICENSING AREAS

The target areas for the Second Licensing Round are all in the Albertine Graben and these are:

  1. LR2_2019_Block01 (Avivi); Area coverage of 1026km2
  2. LR2_2019_Block02 (Omuka); Area coverage of 750km2
  3. LR2_2019_Block03 (Kasuruban); Area coverage of 1285km2
  4. LR2_2019_Block04 (Turaco); Area coverage of 637km2
  5. LR2_2019_Block05 (Ngaji); Area coverage of 1230km2

The demarcation of the areas is based on a 5x5’ block size and its multiples as provided for in the Petroleum (Exploration, Development and Production) Act 2013. 

 

ENVIRONMENTAL IMPLICATION 

Ladies and gentlemen, it should be noted that some parts of the areas earmarked for licensing are in ecologically sensitive areas, such as Ngaji being in a National Park.  However, before any activity is considered in any of these areas, an Environmental Social Impact Assessment (ESIA) will have to be undertaken to mitigate any likely impacts. 

It should further be noted that the exploration activities undertaken in other sensitive ecological areas such as Murchison Falls National Park have demonstrated a positive co-existence with wildlife activities. 

 

LICENSING ACTION PLAN 

Following this announcement, the Ministry will issue a Request for Qualification (RFQ) inviting interested firms and/or consortia to submit applications within a period of 6 months. Upon evaluation of the applications, the successful firms/consortia will be issued with bidding documents comprising the model production sharing agreement and data sale regulations among others. 

The bidding process will take five months and result in the negotiations and signing of production sharing agreements between Government and the successful bidders. The licensing round is expected to be concluded with the award of Petroleum Exploration Licenses to successful firms by December, 2020.

Excellencies, Ladies and Gentlemen, I wish to conclude by expressing my gratitude to H.E. the President of the Republic of Uganda, H.E Y K Museveni for his  visionary leadership and the strong guidance he has given this sector since the 10th February 1986. 

I also wish to thank the East African Partner States for the support provided in facilitating the development of the oil and gas sector in Uganda and the region at large.

I also take this opportunity to thank all potential investors for attending this launch.

It is now my pleasure and honor to announce the Second open Competitive Licensing Round for the petroleum exploration in Uganda open and invite you to participate.

Welcome to the Pearl of Africa and we are ready for business.

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