Cabinet clears Australian firm, UNOC for 2 oil blocks

Cabinet sitting on Monday green lit the signing of Production Sharing Agreements (PSAs) and awarding of exploration licences, respectively, to Australia’s DGR Energy Global Ltd and the Uganda National Oil Company (Unoc) for two oil blocks.

Unoc, the statutory body mandated to handle the country’s interests in all oil and gas licences, was thrown at the deep end of the pool to take on the Kasuruban block measuring about 1,285km2 between Buliisa and Packwach districts. The company has no prior experience in exploration work and as such, it will have to find a suitable joint venture partner nor can it afford to raise enough capital expenditure from the cash-strapped Treasury.

Energy ministry officials told this newspaper yesterday that Unoc has some “technical knowhow” on exploration and the joint venture partner is expected to bring to the table additional technical assistance and financial prowess.

DGR Energy SMC Ltd, a subsidiary of Australia’s DGR Energy Global Ltd, was cleared for the Turaco oil block measuring about 635km2 in Ntoroko District.

The signing of the PSAs—contracts between governments and oil companies on exploration and production oil and gas—and issuance of the exploration licenses is expected within the next three weeks.

The Petroleum (Exploration, Development and Production) Act-2013 that guides on, among other competitive licensing and issuance of licenses, vests powers of signing of PSAs and issuance of licenses in the hands of the minister of Energy.  The two companies emerged the best qualified bidders from a shortlist of four that also included Total E&P Actites Petroliers, France and the joint venture of PetroAfrik Energy Resources East Africa, and Niger Delta Resources Ltd.  The four were drawn from the list of six companies that expressed interest in the second licensing round which was launched in May 2019 during the East African Petroleum Conference held in Kenya’s coastal town of Mombasa. The licensing exercise was meant to attract potential oil companies to take on six left over oil blocks from the first licensing round.

Other oil blocks up for grabs, but were not taken up include Ngaji measuring about 895 Km at the parallels of Lake Edward straddling Rukungiri and Kanungu districts, Avivi measuring about 1,268km2 in Arua, and and Omuka measuring about 750km2 in Nebbi District.

The Ngaji block covers half of Lake Edward and is part of the Queen Elizabeth National Park. It is also part of the same ecosystem as the Virunga National Park – Africa’s oldest national park and a Unesco World Heritage Site. It has been particularly snubbed during both the first and second licensing rounds following a chorus of opposing voices from conservationists.

Mr Frank Mugisha, the acting commissioner for petroleum exploration development and production in the Ministry of Energy’s Petroleum Directorate, told journalists at the Media Centre yesterday that DGR and Unoc will be granted two year’s renewable exploration licenses.

The two companies will now join Australia’s Armour Energy Ltd and Nigeria’s Oranto Petroleum, which were issued exploration licenses in 2017.

Further exploratory works on the blocks, once successful, is expected to increase the current stock tank of oil in place currently estimated at 6.5 billion barrels with 1.4 billion barrels deemed recoverable.

Oil licence

Only 15 percent of Uganda’s oil belt—the Albertine Graben is currently licensed.  Uganda’s Albertine Graben acreage covers 23,918 square kilometres.

Unoc has a separate joint venture agreement with Cnooc Uganda Ltd for development of the Pelican/Crane block which was also floated during the licensing round.

In April 2022, Unoc’s CEO Proscovia Nabbanja signed an MoU with Chen Zhubao to take forward the arrangement.

Energy officials told Daily Monitor yesterday that Cabinet counseled that the Unoc-Cnooc deal will be cleared at a later date.