Seven years after Uganda discovered oil in commercial quantities, the laws and institutions to regulate its oil industry are still evolving, and it could take at least four more years before the East African nation produces its first oil.

The long-awaited Petroleum (Exploration, Development, and Production) Bill 2012 passed by the Ugandan parliament in December 2012 was signed into law in March 2013 by President Yoweri Museveni as the Petroleum (Exploration, Development and Production) Act 2013.

Uganda’s oil reserves are estimated at about 3.5 Bbbl, but development has been slow because of the absence of laws to govern the sector and disputes about tax and development plans.

Uganda energy ministry officials said the new act automatically repeals the petroleum bill enacted in 1985, which was modified in 2000 and successfully guided the country’s oil sector through the initial phases and the licensing of international oil companies that led to the discovery of oil in commercial quantities in 2006.

Since that year, stakeholders including oil prospecting firms had blamed the slow progress of Uganda’s nascent oil industry on the absence of enabling laws to regulate the industry among other factors.

Fred Kabanda, a principal geologist and head of the regulatory unit at the Ugandan Ministry of Energy and Mineral Development’s Petroleum E&P Department, said Act 2013 will now become the main law that will regulate petroleum exploration, development, and production in the industry. However, it has become apparent that other institutions, especially those that the new act stipulated must be created, have not been set up and oil production can’t really get off the ground without them.

The new law, among others, will guide the establishment of the regulatory Petroleum Authority of Uganda and the National Oil Co. (NATOIL), the two institutions critical to the country’s oil industry, according to Kabanda.

Some of the functions of the Petroleum Authority of Uganda are to monitor and regulate petroleum activities including reserve estimation and measurement of the produced oil and gas, according to the Petroleum (Exploration, Development and Production) Act 2013. The authority will advise the Ugandan oil minister in the negotiation of petroleum agreements and the granting and revocation of licenses; and monitor conditions of operators and their trade practices to ensure that competition and fair practice is maintained.

NATOIL will, among other functions, manage the commercial aspects of Uganda’s petroleum activities and the participating interests of the state in the petroleum agreements, according to the act. It also will investigate and propose new upstream, midstream, and downstream ventures initially locally and later internationally.

The act provides for a national content under which preference shall be given to goods that are produced or available in Uganda. Services that are rendered by Ugandan citizens and companies, training and employment of Ugandans, and technology transfer also are stipulated in the law.

“The energy ministry is drafting regulations that will operationalize the two institutions. We are hoping by the end of this year (2013), we shall have these institutions in place,” said Yusuf Bukenya Matovu, spokesman for Uganda’s energy ministry.

After the establishment of both institutions, Museveni has to appoint their board of directors. Oil experts said this process may not be completed in 2013.

Other issues delaying the start of oil production are disputes between the Ugandan government and oil companies, controversies over the terms of production-sharing agreements between them, and disputes over taxation.

Oil production in 2017

Though Uganda suspended issuing new licenses in 2007 to put in place enabling legislation after huge oil discoveries had been made in the country, there have been reports that a new oil licensing round would be held in 2013. This has captured the interest of several companies.

Gloria Sebikari, a communications officer at the energy ministry, said the Ugandan government has so far received requests from about 100 companies for various activities for the 13 oil wells in the Albertine Rift basin yet to be auctioned in a process that is expected to be competitive. A total of 17 oil blocks were demarcated in the basin, but four were awarded before Uganda imposed a licensing ban on new acreage.

Some of the international oil companies from which requests have been received include ExxonMobil, Shell, Rapid African Energy of South Africa, China Petroleum Engineering and Construction Co., and Marubeni, according to information from the energy ministry. However, notices for formal bidding have not been issued to the companies, Sebikari said.

So far, only four oil firms are operating in Uganda. They are Total, Tullow Oil, China’s CNOOC, and Dominion Petroleum. Energy ministry officials said 88 wells have been drilled with successful discovery of oil and gas in 77 wells.

Total, which entered Uganda in 2012, expects to start commercial oil production from its fields in Uganda in 2017, a year later than previous estimates had suggested.

“We are working closely with our partners and the Ugandan governments to get the necessary approvals to enable us [to] deliver first oil by 2017,” Loic Laurandel, general manager, Total E&P Uganda, told the media in Kampala, the Ugandan capital.

In another interview with The CEO Magazine published in August 2013, Laurandel said Total has invested US $1.5 billion for the acquisition of one-third interest in blocks 1, 2, and 3A. On the Block 1, operated by Total E&P Uganda, Total and its partners will have invested $650 million by year-end 2013 since the beginning of 2012.

The money has been invested on surveys as well as exploration and appraisal campaigns, with success such as the latest hydrocarbon discovery at the Lyec-1 well at the beginning of this year, he added.

“The year 2013 will be a very important year for us and the Uganda oil sector,” Laurandel said. “Together with our partners we are hopeful that 2013 will mark the agreement and sign off the development and commercialization scheme with the government of Uganda.”