Government blocks oil firm exit over agreement

Officials say the company should stay until the contract expires.

Kampala

The government has said Dominion Petroleum Company [Uganda] Limited should not leave the industry until its contract expires despite reports that it sold its assets to another firm.

Ophir Energy, a London-based oil and gas company, recently purchased the licences for Exploration Area 4B, covering 510 square kilometres in the southern lakes of Edward and George Basin, from Dominion. But government yesterday said it did not recognise Ophir.

According to a statement from Mr Ernest Rubondo, the commissioner Petroleum Exploration and Production Department, Dominion signed a production sharing agreement with the government on July 27, 2007, granting it exclusive rights to explore petroleum until 2013.

“The government only recognises Dominion Petroleum Company (Ltd) since it has a running agreement with it and not Ophir,” the commissioner noted. He added that “according to the terms of the agreement, Dominion was granted a licence for a duration of six years phased in two [2] years and renewed only twice on fulfillment of work obligations of the previous exploration period.”

A report from Ophir Energy about its assets indicates that, the company (Ophir) fully acquired the assets of Dominion Petroleum in an all-stock transaction of close to £118m (about Shs510 billion), a deal aimed at entrenching Ophir’s position as the biggest independent deep-water oil explorer offshore Tanzania and Kenya.

The takeover by Ophir began last year in October, when Dominion Petroleum issued its whole share capital on UK’s Alternative Investment Market although takeover was announced this year.

But while transaction automatically meant resumption of business by Ophir, the government has since blocked it, arguing that it has an agreement expiring in July next year with Dominion.

An official from Dominion, who spoke to the Daily Monitor on condition of anonymity because he is not the official spokesperson of the oil company, said the company’s exit from the country was being held back by government “red tape” because it was also served with a notice about the takeover deal.

But Mr Rubondo said government is currently considering this notice before relieving Dominion of its rights and obligations.

musisif@ug.nationmedia.com