Uganda News

Two bidders for three oil blocks in the Albertine Graben are being evaluated by the Energy Ministry

The government had wanted to sign Production Sharing Agreements and give exploration licenses to successful corporations by December 2020, but due to a lack of interest from potential investors, the process had to be postponed.

Only two oil and gas companies submitted bids for the Albertine Graben’s second oil and gas licensing phase, which included the exploration of five blocks.

DGR Global, which owns a majority position in Armour Uganda, an Australian corporation looking for oil in the Kanywataba concession, is one of the companies whose offers are being considered.

While the Energy Ministry had picked four businesses to bid for additional oil blocks, URN has learned that several of those companies, notably Total and its partner CNOOC, failed to submit proposals by the end of June.

Total E&P Activites Petrolieres, France; DGR Global Limited, Australia; Uganda National Oil Company Limited (UNOC); and a joint venture between Uganda’s PetroAfrik Energy Resources East Africa Ltd and Nigeria’s Niger Delta Petroleum Resources Ltd have been shortlisted by the Ministry of Energy.

When the government conducted the bidders’ conference in June, CNOOC had joined the process through Total. In an interview, Frank Mugisha, the manager of the second licensing round, stated that only two bidders filed bids for three of the five blocks up for grabs.

Uganda National Oil Company and DGR Global, based in Australia, are the two firms whose proposals are being considered. Turaco, Omuka in Nebbi, and Kasuruban, which stretches between Buliisa and Packwach, are among the blocks that have drawn bidders thus far.

According to Mugisha, the bid evaluation should be completed by the second week of September, and negotiations with winning bidders should be completed by the end of December 2021.

Following the conclusion of negotiations, three exploration licenses in the Albertine Graben will be awarded. The second licensing round aims to boost foreign investment in Uganda’s oil-rich energy sector. The advent of the COVID-19 pandemic has had a significant impact on the second licensing phase.

The government had wanted to sign Production Sharing Agreements and give exploration licenses to successful corporations by December 2020, but due to a lack of interest from potential investors, the process had to be postponed.

When Total, the French oil giant, and CNOOC, the Chinese oil behemoth, expressed interest in the new competitive bidding round, the Ministry of Energy was ecstatic. It was thought that CNOOC’s participation would bring competence in offshore drilling.

Offshore refers to the development of oil fields and natural gas resources beneath the sea in the oil and gas industry. Oil prospecting and probable drilling will take place in Uganda near Lake Albert, on the Uganda-DRC border.

Total did not summit for the bids under offer, according to a source familiar with oil and gas exploration, who told URN she was not surprised.

“Total will most certainly come in later, once the smaller businesses have made their discoveries. Remember, Total came in after we were given production licenses,” added the source, who did not want to be identified.

While it is not guaranteed that Uganda National Oil Company or DGR Global will be selected for the three blocks, the source claims that DGR’s involvement in Uganda’s oil and gas industry will be critical, given the company’s global interests in energy and minerals.

DGR Global now owns an ownership investment of 83.18 percent in Armour Energy Uganda, while Armour owns a 16.12 percent stake in the project. Nicholas Mather, DGR Global’s Chief Executive Officer, intimated in July that the company was interested in Uganda’s minerals as well.

Under International Climate Change scenarios, he said, estimates for oil and gas as an energy resource remain solid through 2040. Armour Uganda’s oil project is owned by DGR Global, which owns a 17 percent share.

Two years after declaring force majeure, Armour Energy announced this month that it is beginning its 2D seismic operation in Uganda. Following problems in the Kanywataba contract area block, the company ceased operations in October 2019. The COVID-19 pandemic hampered its operations even further.

According to Mather, the Kanywataba block is a high-potential oil and gas project that might provide the corporation with significant resources.

The government is expected to add time under force majeure to Armour’s contract. This year’s license was set to expire on September 13th. The license should be valid till the end of next year due to the declaration of force majeure. Uganda is a low-risk destination for world-class onshore oil finds, according to DGR Global.

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