Total, which entered Uganda’s oil sector earlier in 2012, has confirmed the discovery of more oil in Uganda’s northern region. The country is contemplating holding a licensing round mid-2013 and the second of three oil bills was passed on Feb. 21, 2012. Uganda also is going ahead with plans to build a refinery and possibly participate in the construction of a pipeline to Kenya’s port of Mombasa.

Uganda’s profile as a potential top oil producer in East Africa is rising. Ernest Rubondo, commissioner of the Petroleum Exploration and Production Department in the capital, Kampala, announced that Uganda has oil reserves estimated at 3.5 Bbbl and could pass 10 Bbbl of oil as more explorations were going on.

And true enough, Uganda’s oil prospects improved in January 2013 when Total and government officials revealed that the company struck oil in Nwoya District of northern Uganda following months of extensive drilling activities.

“Total confirms the discovery of hydrocarbons during the drilling of the exploration well Lyec-1 (in Block 1A),” said Florent Segura, the company’s spokesman, quoted by NewVision. He explained that the discovery required further appraisal to determine its potential. Oil experts in Uganda said the new oil find is a major boost for Total’s operations in Uganda.

The exploration license for the discovery found in Block 1A was due to expire on Feb. 3, 2013.

“Total will automatically retain the license. We have asked them to apply for an appraisal and production license for the block,” said Honey Malinga, the assistant Commissioner at Uganda’s state-run Petroleum Exploration and Production Department, according to NewVision.

He explained that the discovery also would boost the size of Uganda’s crude reserves, currently estimated at 3.5 Bbbl.

Segura said that Total has asked Ugandan authorities to renew the license so that the company could continue its exploration program.

Total, which entered into a trilateral partnership with Tullow Oil and China’s state-run CNOOC to develop Uganda’s oilfields early last year, is the operator of Exploration Area 1. This lies in the northern end of Lake Albert and next to Total’s other blocks in the region, which contains Uganda’s largest oil fields such as Buffalo and Girafee.

Malinga said Total co-owns the license with CNOOC and Tullow Oil, adding that Total had drilled three dry wells in the block before striking oil in the fourth in late December 2012. He said the license would have reverted to the government if the company had failed to discover oil before it expired.

Loic Laurendel, Total E&P general manager in Uganda, said the company was working with its partners and the Ugandan government to get the necessary approvals to enable the company deliver first oil by 2017. He said the company expects an initial output of around 20,000 b/d from its block on the northern tip of Lake Albert but this will gradually rise before reaching 200,000 b/d to 230,000 b/d by 2020.

Oil Licensing Round

Uganda hopes to hold its first public oil exploration licensing round mid-2013. Government officials say at least 13 oil blocks in the Albertine Rift Basin will be auctioned. They said the ban on licensing should be lifted before the bid round.
This licensing round will be Uganda’s first since is imposed the ban in 2007 because of the confirmation of oil reserves in the country.

Before the ban, Uganda licensed explorers on the basis of “first-come, first-serve” but the government now said companies will have to compete during the bidding and it has been pushing for tougher contractual terms with oil companies.

Tullow Oil, Total SA, and CNOOC currently have licenses in Uganda but Eni, Lukoil, and India’s Essar Oil Ltd. have indicated they would like to acquire licenses in Uganda.

Oil experts say the granting of new licenses will be a test for the new oil laws passed in Uganda.

Second Oil Bill

Uganda’s parliament passed the country’s controversial Petroleum (Exploration, Development, and Storage) Bill in December 2012 that prepares the East African nation to move from oil exploration to production between 2014 and 2017.

The objects of the upstream bill, the first legislations in Uganda’s oil and gas industry, are to regulate all aspects of the petroleum industry; establish the Petroleum Authority of Uganda; provide for the national company; regulate the licensing and participation of commercial entities in petroleum activities; and provide an open, transparent, and competitive process of licensing.

The second bill, the midstream Petroleum (Refining, Gas Processing, Conversion, Transportation and Storage) Bill 2012 was passed late last month and it moves the country closer to completing a new regulatory framework for its young oil and gas industry. The bill will regulate the installation and operation of oil and gas processing infrastructure and marketing of final products.

Uganda’s parliament is expected to consider and pass the third and final oil revenue management bill in the coming weeks.

Refinery

Progress is being made in Uganda’s efforts to build a 60,000 b/d refinery in Buseruka in Hoima District following the approval of a resettlement plan by the Ministry of Energy for some 7,000 residents in 14 villages around the refinery area.

Officials in Kampala said negotiations are expected to begin with potential investors in the refinery as soon as the downstream bill is signed by Ugandan President Yoweri Museveni. They estimate the refinery will cost US $2 billion.
Meanwhile, Uganda, Kenya, and South Sudan are discussing the possibility of constructing an oil pipeline which Uganda can use to export its crude oil through Kenya’s port of Mombasa.

Obafemi Oredein, Special to E&P