Uganda: Investors Prepare Finance Plans As Uganda's Oil Sector Reawakens
Posted on :Wednesday , 21st September 2016
A lot more attention is expected to be placed on how companies source for finance to invest in Uganda's oil industry after government created nearly all the necessary structures for an industry that has been quiet for far too long, writes EDWARD SSEKIKA.
After three years of subdued activity, Uganda's oil and gas sector is back on track. Recent developments, where oil licenses have been issued and heads of institutions appointed, are set to spark off some activity in a sector that had gone literally into limbo. Recently, Energy Minister Irene Muloni issued eight production licenses to Tullow Operations Pty Ltd and Total E&P Uganda BV.
The minister issued five production licenses for Tullow and three for Total. The licenses are in respect of Mputa-Nzizi-Waraga, Kasemene-Wahrindi, Kigogole-Ngara, Nsoga and Ngege fields in Exploration Area 2 (EA2). Total, on the other hand, was awarded exploration licenses for Ngiri, Jobi Rii, and Gunya fields in Exploration Area 1 (EA1).
The issuance of the production licence puts back on course the country's hopes of having its 'first oil' by 2020. The award of production license follows a conclusion of the evaluation of the application for production licenses over these fields submitted by Tullow and Total to the ministry of Energy and Mineral Development about three years ago.
The joint venture companies, in their joint statement, welcomed the issuance of the licenses.
"The joint venture partners are, indeed, grateful to the government of Uganda for the approvals granted that will now enable us to proceed with activities required to make a final investment decision for the integrated Lake Albert project. This approval marks a major milestone towards the production of Uganda's oil resources," the statement reads.
The companies added: "It complements the production licence issued to Cnooc Uganda Ltd as the operator of Exploration Area 3 (Kingfisher) and the important decision made to export crude oil to the international market through a 24-inch, 1,443km pipeline from Kabaale to Tanga port. The granting of production licenses now paves way for the joint venture partners and other stakeholders to make considerations for significant long-term capital and infrastructure investments in Uganda."
Government is also expected to issue oil exploration licenses soon to four companies that were selected after the country carried out its first competitive bidding round. Government is already in negotiations with three oil companies over production sharing agreements in at least five oil blocks.
According to the Petroleum Act, 2013, production licenses are valid for 20 years from the day they are granted, subject to renewal for another five years. While issuing production licenses recently, Irene Muloni, the minister of Energy and Mineral Development, implored the oil companies to now make final investment decisions.
"Companies are required to take final investment decisions in the first 18 months after the issuance of production license," Muloni said.
Uganda expects to produce between, 200,000 and 230,000 barrels of oil per day, when production finally starts.
OIL INSTITUTIONS
The institutions needed to govern the oil industry are now all in place - the Petroleum Authority of Uganda and the Uganda National Oil Company Ltd. Ernest Rubondo has already been appointed the executive director of the Petroleum Authority of Uganda (PAU), which will regulate the oil industry.
Rubondo's appointment ended a search which had started in January 2016. His appointment took effect on September, 1, 2016.
Until his appointment Rubondo was the acting director for the Petroleum Directorate in the ministry and formally a commissioner in the Petroleum Exploration and Development Department (PEPD), which was later upgraded to a directorate.
In his long career, Rubondo has been a key participant in the promotion of Uganda's petroleum potential, negotiating the country's production sharing agreements, monitoring the work of licensed oil companies and negotiating the commercialization avenues for the country's crude oil.
"I am confident, therefore, that Rubondo's experience and leadership will be a great resource to the efficient start-up and operationalization of the Petroleum Authority of Uganda," Kabagambe-Kaliisa, the permanent secretary in the ministry, said.
Earlier, Dr Josephine Wapakabulo took office as the chief executive officer (CEO) of the National Oil Company. The National Oil Company will be in charge of the country's commercial interest in the oil sector.
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