International Oil Companies Line-Up for Ugandan Licences

Over 100 oil companies are queued up for the next licensing regime to get into Uganda’s oil market but government wants to maintain the moratorium now in its fourth year even longer.

The stampede in the application for licences in the Albertine Graben, where oil fields are located, comes after suspension of licensing in 2007 and a turn in policy to competitive bidding from the first come first serve open door policy.

The more competition for exploration licenses the better the chances that Uganda will select companies that enable its $2 million refinery to be a reality and also leap into the midstream sub-sector stage of transportation, processing and refining.

“We need companies that have capital because the next stage is capital intensive. We also need to ensure we have a refinery. If you have a poor company they may not comply with the environment rules, which could be a problem,” said assistant commissioner in charge of geology at the Petroleum Exploration and Production Department (PEPD), Robert Kasande.

Although he would not disclose names, Kasande said big oil players from around the world have submitted their particulars and proposals now in the database at PEPD waiting. But he does not know when licensing would resume.

“Until the new law is out there will be no licensing. I advise that we maintain the moratorium until such a time that you exhaust those that are already discovered,” said chief technical advisor oil and gas industry, Reuben Kashambuzi.

The 2000 Petroleum Act will be reviewed by the ninth parliament and it will operationalize the Oil and Gas policy. The policy says the new Act will provide for the development and production of natural gas, bring on board international best practices like Improved Oil Recovery (IOR) as well as health, safety and environment standards.

So far, five of the current nine exploration areas identified have been licensed to international oil companies. Tullow Oil, is a leading oil and gas exploration or upstream company and the dominant player in Uganda’s market, other operators are Dominion and Neptune.

Tullow this year farmed down its interests and brought on board “Total for midstream activities and China National Offshore Oil Corporation (CNOOC) for downstream,” said corporate Affairs manager Tullow oil Uganda, Jimmy Kiberu.

In the meantime, the government is discussing “a basin wide development concept to integrate everything, for instance there will be a Central Processing Facility (CPF) for all the oil and then to the refinery. This will reduce the footprint in the area,” said Kasande.

But to get over 100 companies interested in its oil sector, Uganda has come a long way after having licensed only one company in the early times. In 1991, the Petroleum Exploration and Production Department (PEPD) was created following the signing of the first ever Production Sharing Agreement (PSA) in the country.

According to PEPD records, the PSA was signed between the Uganda Government and Fina Exploration Uganda, a subsidiary of Petrofina in March 1991.

Prior to that in 1988, the government held negotiations with Shell, Esso of the USA to later be joined by Petrofina and Total. But all these withdrew and left only Petrofina that also did not do much work and left in 1993 after its license expired.

“We had been scratching for a long time. When Petrofina came we said take. If they had not left in 1993 we would be crying to our beds every night,” said Kashambuzi.

PEPD then adopted the open door policy, which was appropriate at that time, to now adopt the competitive bidding that will be used for the next licensing regime, which awaits parliament’s approval.