Uganda will finally award three oil production licences, bringing to an end a drawn out process that industry watchers blame for pushing forward the date for first oil production and reduced investment by oil companies.
The three licences will be awarded to Tullow Oil and Total E&P Uganda, after Cabinet approved the energy minister’s recommendation on Wednesday.
The decision comes days after the energy ministry invited four companies – three from Nigeria and one from Australia – to negotiate for five production sharing agreements for new exploration blocks.
It is the second time Uganda is awarding production licences, after issuing a $2 billion licence to China National Offshore Oil Corp. for the Kingfisher field in September 2013. The new licences will cover the Ngiri, Jobi-Rii and Gunya fields in Exploration Area 1 of the Albertine Graben region.
A production licence grants an oil explorer exclusive exploration and production rights in a defined area.The licences to be issued by the energy ministry have a duration of 25 years and can thereafter be renewed for 5 more years.
Analysts have blamed delays in issuing the licences for pushing back the first date for oil production. The delays arose from the absence of an operational Petroleum Authority, whose board was only constituted this year.