The Ministry of Energy and Mineral Development has granted eight oil production licences to Tullow Uganda Operations Pty Limited and Total E&P Uganda B.V., according to a statement released by the ministry. The development will allow the companies to commence exploration activities and give a new impetus to Uganda’s oil production ambitions.
Tullow was granted five licences for Exploration Area 2, while Total was granted three licences for Exploration Area 1. The two companies – together with China National Offshore Oil Corp. – have an equal stake in the exploration areas.
“The three production licences granted to TOTAL as operator of EA1, and on behalf of CNOOC and Tullow, who are joint venture partners in this exploration area are; the Ngiri Production Licence, the Jobi-Rii production licence and the Gunya Production Licence,” the statement says. “Evaluation of two additional applications for production licences over the Mpyo and Jobi 2 East discoveries in EA1 is still ongoing while the Lyec discovery in this exploration area is still undergoing appraisal.
“The five production licences granted to Tullow as operator of EA2, and on behalf of CNOOC and TOTAL, who are joint venture partners in this exploration area are Kasamene-Wahrindi production licence, Kigogole-Ngara Production Licence, Nsoga Production Licence, Ngege Production licence and Mputa-Nzizi-Waraga Production Licence.”
The licences have a duration of 25 years and can thereafter be renewed for 5 more years.
The final investment decision on the projects is expected 18 months after the issuance of licences, much later than what the companies had projected. Tullow, for example, had planned to make a final investment decision in early 2017; that decision, though, was based on it receiving a licence in 2015.
The three companies are expected to spend over $8 billion in exploration and production activities for the licences, according to the statement.
The government will have a 15% interest in the licences through the Uganda National Oil Company, as specified in the Production Sharing Agreements signed with the oil companies.
Meanwhile, revenues from the licences are estimated to average $1.5 billion annually for as long as production is ongoing in the oil fields. The licenced fields have the potential to produce between 200,000 and 230,000 barrels of oil per day, according to the energy ministry.
Uganda’s proposed 60,000 barrels per day refinery will have right of first refusal on the oil produced from the fields, in accordance with a Memorandum of Understanding signed between the government and the oil companies in February 2014.
Cabinet approved the energy minister’s recommendation of the two companies early this month, three years after the first production licence was issued to China National Offshore Oil Corp. for the Kingfisher field.
Cnooc, however, entered into an agreement with Tullow and Total in 2012 in which the three companies each acquired an equal interest in the Lake Albert Exploration Areas 1, 1A-Lyec, 2 and 3-Kingfisher. The agreement gave each company an equal stake in the exploration areas operated by the three partners.
The agreement also ensured that the three companies have to move in tandem with each. It was therefore not possible for Cnooc to move ahead with activities in its licenced areas until its two partners received licences from the government.
The delay in issuing the new licences – Tullow applied for its licence in 2013, Total in 2014 – has been blamed on the absence of an operational Petroleum Authority. But government has recently moved to operationalise the authority, constituting its board this year. The board’s first Executive Director was also appointed two weeks ago.
The petroleum authority is tasked with monitoring and regulating the exploration, development and production of petroleum in Uganda. It also advises the energy minister in the negotiation of petroleum agreements and in the granting and revocation of licences.
Four companies were early this month invited to negotiate for five production sharing agreements for new exploration blocks. Production licences will be issued to the companies – three of which are from Nigeria and one from Australia – in the event of successful negotiations. The negotiations are expected to be concluded this month.
First oil production is expected in 2020, according to the statement.