The ministry of Energy and Mineral Development (MEMD) plans to open up another oil basin in the country, almost ten years after it hit its first well in the Albertine basin.
Frank Mugisha, the acting commissioner in charge of exploration in the Petroleum Directorate, said the country was going to start exploring for oil in Lake Kyoga in central basin and Moroto-Kadama basin in Karamoja sub-region. He said the opening up of these basins could come as early as this financial year.
“The ministry plans to undertake speculative surveys in the two basins.
These surveys will be followed by seismic surveys. We hope in the future, these areas will also be opened for licensing,” he said.
Uganda is currently concentrating on licensing out six oil blocks in the Albertine basin. Mugisha said government was expected to call for bids on October 1, 2015. This would be the first round of open bidding in the country.
After the issuance of bid documents, Mugisha said, prospective companies would be given three months within which to submit the bids. After that, government would take one month to evaluate the bids and another one month for negotiations and issuance of exploration licenses.
Practically, this means exploration licenses are expected to be issued in the first quarter of next year. Already, 16 companies have been pre-qualified to submit bids. The country has opened up six blocks for the new licensing round and expects to bring on board six other companies in the exploration.
Mugisha said they are now awaiting instruments of power from the president to officially start work. Although, he added, the delay in creating the Petroleum Authority was slowing down the oil industry.
After a long wait, government also promised to issue production licenses to Tullow and Total E&P Uganda Limited. In an interview on the sidelines of the Uganda International Oil and Gas Conference 2015 at Serena hotel, Kampala on Wednesday, Robert Kasande, the head of Midstream Department in the Petroleum Directorate, said the technocrats in the ministry had already drafted the production licenses.
“The draft production licenses are already with the minister,” he said.
Kasande explained that the ministry’s target is to issue production licenses to the two oil companies before the end of this year. Currently, only Cnooc Uganda Limited has a production license, which it received in 2013, for the Kingfisher oil field in Hoima district.
Tullow and Total applied to government to be issued with production licenses. As a requirement for the application of production licenses, the companies also submitted Field Development Plans (FDPs) and petroleum reservoir reports to government for approval.
Government’s delay to issue the two oil companies with production licenses, has dominated most oil and gas discussions in the country. This delay has slowed down the sector and is partly blamed for the layoff of staff across the three major oil companies.
One of the main issues behind the delay to grant production licenses has been the disagreements between government and the oil companies over the rate of recovery of oil from the fields.
In April this year, during the Oil and Gas Convention 2015, organised by the Uganda Chamber of Mines and Petroleum, Ernest Rubondo, the acting director of the Petroleum Directorate, said that in the Field Development Plans (FDPs) that Tulow and Total submitted to the ministry, the companies wanted only to invest in the wells that had substantial oil, were easy to develop, and leave behind those that had contrasting features.
Yet, he added, government believed that all the oil wells should be developed together. Rubondo explained that there were oil wells where companies wanted to recover less than 10 per cent, and yet government believed that the technologies available today could support the recovery of a higher percentage.
“The country needs a return on its resources. This is not to say we should not improve decision-making; we shall improve where possible. These are the
circumstances under which we are having a delay. We need a win-win situation. In a situation like this, it is not a matter of taking decisions, but negotiations,” he said.
Tullow had proposed a recovery rate of less than seven per cent in only two oil wells. But Kasande said some of the issues surrounding recovery rates and other issues have not yet been fully resolved.
“Some production licenses will be issued but with some conditionalities which will have to be met,” he said.