Aerial view of oil activities in Buliisa districtAccording to the minister of state for National Guidance, Godfrey Kabbyanga, a cabinet meeting held last week approved two oil companies following successful negotiations. Kabbyanga says that 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).

 
“Cabinet also approved the signing of the petroleum sharing agreement and grant of exploration licences to Uganda National Oil Company (UNOC) and DGR Energy Turaco Uganda SMC Limited…two more lincences will be issued for exploration,” said Kabbyanga.

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. Heritage Oil, a British company had done some exploration in the area but abandoned it in 2004. The block reverted to the government as per the laws.

On the other hand, UNOC will be undertaking operations in Kasuruban exploration area that stretches over 1,285 square kilometres stretching between Buliisa and Packwach districts. This license was previously held by Tullow which made some discoveries. Tullow did not however go further with more drilling. 

 
The Anglo-Irish firm relinquished the block to the Ugandan 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 yet been given out are; Avivi (1026km²), Omuka (750km²) and Ngaji (1230km²).

Frank Mugisha, the ministry of Energy assistant commissioner and licensing manager for upstream petroleum management says the two firms will initially get two-year exploration licenses for the blocks. Mugisha says that for DGR, the license can be extended for two more years while UNOC’s licence can be extended to six years. He adds that 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.

 
“Of course after those two years, there could be another renewal for another two years because when you look at an area like Kasuruban has offshore, offshore that is lake environment, onshore that is land environment and the data within that block is not a lot…So the company which is UNOC may need time to look for a partner. So for UNOC, it needs years to detail exploration and once they are successful, they will be issued with a production licence,” said Mugisha.

He however adds that UNOC’s license is preconditioned as the company is required to find a suitable joint venture partner within the first exploration period.

 
“Their licence is tagged on having a partner because as you know UNOC will be getting funds from government coffers and these funds are definitely risk capital. So ideally I would not want government not to waste a lot having these funds injected into exploration. So UNOC will find a partner who will now come and inject funds and in some of the areas UNOC will be carried over so we would want the partner to take most of the risks so that the risks are not embedded on a Ugandan or the Nationala Oil company,” added Mugisha.

In 2015, Uganda held its first oil block auction, which included six 2,674 square kilometre-sized exploring regions. Before that, the country distributed blocks based on who arrived first.

Armour Energy Limited of Australia and Oranto Petroleum of Nigeria, took part in the first round, and they both later signed 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 and attract new investment.
 
So far, 40 per cent 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.  

 
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