Uganda’s Licensing Round attracted right blend of oil companies – Energy Ministry

The Ugandan government has responded to claims that the last licensing round was unsuccessful by virtue of having attracted mainly small and medium exploration companies.

According to Acting Principal Petroleum Officer at the Ministry of Energy and Minerals Development Peninah Aheebwa the licensing round saw the right blend of oil companies as applicants who included two large companies (market capitalization of over $25billion), five medium companies (market capitalization of  between $5 and $25 billion) and ten small companies (market cap is less than $5billion).

Uganda says despite the large number of small and medium companies the explorers are known to be good at undertaking exploration especially during the early stage when exploration risk is high as they are also more adaptive, collaborative, nimble, focused and innovative.

“The majors and large companies on the other hand have all the necessary capital and expertise and often buy off small companies that have made discoveries before or during development and production work,” she says.

Peninah adds that the aspect of small to mid-sized companies undertaking exploration and subsequently being replaced by large oil companies is an established process in the oil and gas industry worldwide.

Meanwhile the Acting Principal Petroleum Officer also responded to an article by a local daily that the oil projects in Uganda were unattractive.

Currently the major financing needs in Uganda’s oil and gas sector currently include;

  1. the development of the 17 oil fields estimated at $10billion, a responsibility of the licensees to raise, however, the Production Sharing Agreements (PSAs) provide flexibility in financing options;
  2. development of a 60,000 barrels per day greenfield refinery which includes a 205 kilometers products pipeline estimated in excess of $4billion; and
  3. development of a crude oil Export Pipeline so far estimated at over $6billion.

According to Peninah Uganda will be a price taker for its crude oil and so all is being done to achieve the lowest breakeven price possible (currently estimated in the range $30 – $60 per barrel).

To achieve this the country is currently considering some cost saving initiatives being considered including:

  • integrated development planning of the fields for sharing of facilities
  • design optimization at Front End Engineering Design (FEED)
  • operating cost minimization together with early project execution among others.

“In addition, considerations are being made to ensure that the fiscal system specifically the rules on Value Added Tax (VAT), Withholding tax on imports and thin capitalization among others do not add to the capital expenditure,” she adds.

Peninah concludes that the oil and gas projects in Uganda are still robust amidst the oil slump and several measures are being put in place to ensure that timely and positive Final Investment Decisions are made.

Meanwhile the Ugandan parliament has recommended a loan request of USD 145 Million to be approved to finance the Albertine Region districts road connectivity development project

The funds will be sourced from the International Development Association (IDA) of the World Bank Group and will be used to finance the upgrading of 100km stretch of road from Kyenjojo to Kabwoya which forms part of the 238 kilometre Kyenjojo – Hoima – Masindi- Kigumba road connecting the five districts of Kyenjojo, Kibaale, Hoima, Masindi and Kiryandongo in western Uganda commonly known as Albertine region.

The Ugandan government is expected to contribute $8.89 million over a period of five years.