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Oil and Gas

Key Highlights and Developments in Uganda’s Oil Sector (July 2011)

English: Uganda (orthographic projection) Port...

English: Uganda (orthographic projection) Português: Uganda (projeção ortográfica) Español: Uganda (proyección ortográfica) (Photo credit: Wikipedia)

Uganda’s exports are almost entirely agricultural: coffee, tea, flowers, and lately foodstuffs especially to the Republic of South Sudan. Its imports are largely finished products, which are quite expensive. The country’s being landlocked does not help things. Petroleum products are some of the key imports, eating up more than 15% of Uganda’s total import bill. These products are imported through the Kenyan port of Mombasa, a distance of 1,300km from Kampala. To reverse this state of affairs, the country is looking to produce and refine its own crude oil.

Petroleum occurrence was first recorded in Uganda’s Albertine Graben in the early 1920s. One deep well was drilled in 1938, which encountered some hydrocarbon shows but was not tested. There was virtually no activity between 1940 and 1980 largely due to the Second World War and political instability in the country. A modern and consistent effort to establish the country’s petroleum potential has been undertaken since the 1980s. It picked up a faster pace in 2003-2004.

1985: Enactment of the Petroleum (Exploration and Production) Statute, 1985 (now Act 2000).
1991: Formation of PEPD and commencement of ground geological and geophysical data acquisition. PEPD’s mandate is: “To establish the petroleum potential of the country and promote its sustainable development.”
1993: Formulation of the Petroleum (Exploration and Production) (Conduct of Exploration Operations) Regulations. (These regulations are currently guiding the upstream petroleum sub-sector).
1997: Licensing of Heritage to EA3, subsequent acquisition of 2D seismic data in 1998 and drilling of Turaco wells in 2002 – 2004.
2001-2006: Licensing of Hardman (now Tullow) in EA2, Heritage in EAs1&3A, Neptune in EA5. First oil discovery in Uganda in 2006 by Hardman Resources –the Mputa discovery.
2007: Licensing of Dominion in EA4B.
2008: Formulation of the National Oil and Gas Policy.
2011: 19 oil/gas discoveries made todate.
Status of Licensing

The Albertine Graben is sub-divided into 10 Exploration Areas
There are 5 active Production Sharing Agreements (PSAs)
There are 3 licensed operators – Tullow, Tower Resources, and Dominion.
Licensing was suspended in July 2006, partly to allow demarcation of smaller blocks given the high success rate of exploration in the basin, and to also draw up an oil and gas policy. Some 80 companies are waiting to apply once the moratorium is lifted.
A company holds a licence for a maximum of 8 years, after which the acreage reverts to the government in case no oil is struck. Companies only keep wells – for further development – where they have struck oil.
Tullow is finalising a farm down to TOTAL (French) and CNOOC (Chinese).
Discoveries and Reserves
19 oil and/or gas discoveries made from 52 out of 55 wells drilled.

More than 2.5 billion barrels of STOIIP – Stock Tank Oil Initially in Place.
One billion barrels is recoverable.
Less than 30% of the Albertine Graben has been evaluated.
Four discoveries namely Mputa, Kajubirizi (Kingfisher), Kasamene and Nzizi are at field development stage.
These fields (Mputa, Kajubirizi & Kasamene) hold in excess of 700 million barrels recoverable reserves.
Type of crude is 30-34 API low sulphur, waxy crude, Pour point of ~40 degrees Celsius.
Over US$1bn invested in seismic and drilling of wells since 1998.
Cost of finding a barrel of oil in Uganda has been very low.
Bigger investments required to develop discovered oil and gas resources.

Exploration Areas 2 and 3A are at the development stage.
Draft field development plans have been submitted for Kingfisher and
Production licences have been applied for Mputa, Waraga and Nzizi discoveries.

Exploration continues in Exploration Areas 1, 4B and 5
Appraisal continues for the discoveries made in Exploration Areas 1, 2 and 3A
Petroleum exploration and production is governed by:

The Petroleum (Exploration and Production) Act, Cap 150, Laws of Uganda 2000 (former Statute 1985).
Petroleum (Exploration and Production) (Conduct of Exploration Operations) Regulations, 1993.
Production Sharing Agreements (PSAs).
Environment, wildlife, water statutes and guidelines.
Downstream aspects of the industry are governed by the Petroleum Supplies Act of 2003.
A National Oil and Gas Policy for Uganda was formulated and adopted in 2008. Its goal is: “To use the country’s oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to society.”
Implementation of the policy:

New petroleum legislation to make policy operational is being drafted.
A feasibility study on crude oil refining in Uganda has been completed. The government is now looking for a partner to build the refinery under the public private partnership arrangement. Development of a refinery in Uganda is in line with the East African Community Strategy, adopted in 2008, for development of regional refineries.
A communication strategy has been developed. Implementation is about to begin.
Close monitoring of environment and biodiversity being undertaken. Basin-wide environment strategy being developed – includes broad oil spill contingency plan.
New petroleum institutions (Petroleum Authority, Directorate of Petroleum, and National Oil Company) are being put in place.
Local content study being undertaken to ensure optimum national participation in oil and gas activities.
Support for the introduction of training courses focusing on the petroleum industry.
BSc petroleum geoscience and production now offered at Makerere University.
Certificate and diploma in petroleum studies offered at Uganda Petroleum Institute, Kigumba.
Training of staff in government institutions on oil matters going on.
Mergers and Acquisitions

Tullow has completed the purchase of Heritage assets in Uganda.
Tullow is in the process of farming-down, or partly divesting its assets in Uganda, to CNOOC and TOTAL.
Tullow has presented plans of how the three companies will partner in the three licences.
All these transactions have been discussed with government, which has to give the final approval.

Source: Petroleum Exploration and Production Department (PEPD)



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