BY PAUL TENTENA
KAMPALA, UGANDA- Uganda has signed two Production Sharing Agreements (PSA) and issued two Licenses for Petroleum Exploration, Development and Production over the Ngassa Contract Area with Oranto Petroleum Limited from Nigeria.
This brings the number of oil explorers in Uganda’s oil sector to five after exploration and production licenses were awarded to Total E&P of France, Tullow Oil from United Kingdom, CNOOC of China and Armour Energy of Australia.
“We have granted Oranto Petroleum Limited two Petroleum Exploration licenses for the Shallow and Deep plays in the Ngassa block.
“The licenses have been stratigraphically delineated. This is the first time Uganda and indeed the East African region is undertaking Stratigraphic licensing, where two licenses are issued vertically over the same block. Stratigraphic Licensing is provided for in the Petroleum Act 2013,” said Eng. Irene Muloni, Minister of Energy and Mineral Development.
Muloni said the two Exploration licenses covering 410 sq. Kilometer are for four years split into two periods of two years each.
“Each Production Sharing Agreement has a minimum Work obligation together with a minimum Exploration Expenditure.
“During the first two years, the company will reprocess existing seismic data, acquire new seismic data, and carry out geological and geophysical studies as well as feasibility studies for drilling from the lake with a minimum expenditure of $ 2.4m.
“During the subsequent two years, the company will acquire more seismic data, construct a drilling facility and drill at least one well on the lake at a minimum expenditure of $29m. An Advisory Committee for each license, chaired by the Petroleum Authority of Uganda, and consisting of representatives from Government and the Licensee to review and approve all annual exploration work programmes, budgets and production forecasts shall be put in place,” said Muloni.
She said Payment of Royalty based on the Gross Total Daily Production in Barrels of Oil Per Day (BOPD) and for both PSAs, the rate of royalty ranges from 5.5% to 18% was agreed as well as State Participation by Government or its Nominee at not more than 20% and Cost Recovery limit for Petroleum set at 65%.
Prince Arthur Eze, the Chairman Oranto International Limited said they will initially invest $10million to $15million in the exploration stage and about $2.4b during the production and pipelines transportation stages.
“The Ngassa block, which was initially part of EA2 which is licensed to Tullow, is covered with good quality 2D and 3D seismic data acquired between 2003 and 2008.
“Since the structure lies entirely under the lake, two deviated wells, Ngassa-1 and Ngassa-2 were drilled on land at the periphery of the main structure between 2007 and 2009 respectively in order to access the reservoirs.
“Both gas and oil shows were encountered by the two wells. However, a large part of the structure still remains untested, hence the need to relicense it,” said Robert Kasande, Ag. Permanent Secretary Ministry of Energy.
The Ngassa block has been stratigraphically delineated into the Shallow Play contract area which extends from the ground surface down to top of Mid Pliocene and the Deep Play contract area which starts from top Mid Pliocene and continues down to basement.
Stratigrahic licensing, whereby licences are issued for blocks delineated vertically rather than horizontally is not uncommon in the oil and gas industry.
Examples of countries that have done stratigrahic licensing include Norway and Trinidad & Tobago. Stratigraphic licensing is aimed at ensuring that the full potential of the acreage is explored since companies may be inclined to relinquish shallow reservoirs as they tend to be more gas prone in the Albertine Graben, as opposed to the deep reservoirs which are more oil prone.
He said the licensing of new upstream players together with the progress made on the Front End Engineering Designs (FEED) for the (9) Production Licenses, refinery negotiations and the East African Crude Oil Pipeline (EACOP) project will bring accelerated Oil and Gas activities in the country by the end of next year.
The signing of the PSAs and Licence award was cleared by Cabinet and the Ministries of Finance, Planning and Economic Development together with that of Justice and Constitutional Affairs.
Uganda’s first licensing round covered six blocks with a total acreage of 2,674 Km2 in the Albertine Graben, Uganda’s most prospective sedimentary basin.
This first licensing round was undertaken in line with the National Oil and Gas Policy for Uganda (2008) and in accordance with the Petroleum (Exploration, Development and Production) Act 2013.