Exploration and Appraisal of Oil and Gas Discoveries

BACKGROUND

In Uganda, the most prospective area with potential for petroleum is the Albertine Graben. E.J. Wayland, a Geologist with the Colonial Government made the first assessment of the Oil and Gas(O&G) potential of Uganda, and documented hydrocarbon occurrences in the Albertine Graben in the 1920s. This was followed by drilling of many shallow wells around Butiaba and Kibiro localities, with the deepest well called Waki-B-1 drilled in 1938. There was no activity until the 1980s because of political instabilities due to the Second World War and the post-independence turmoil in Uganda. There was renewed interest in the region in the early/mid-eighties. Subsequently, in 1983/4, aero-magnetic surveys were undertaken to quickly identify potential areas with hydrocarbons in the western part (Rift System). In 1984 a Petroleum Unit under the Department of Geological Survey and Mines was created, and in 1985 the first legislation for petroleum exploration and production was enacted. In the 1990s, the acquisition of additional geological and geophysical data which was used to promote oil exploration in Uganda in International Fora was undertaken.

 

These efforts were successful, and Uganda was able to attract investors and investment capital. Companies that specialise in exploration were licensed – starting with Petro Fina in 1991 and Uganda General Works Engineering Company in 1993. Although these two (2) companies did not do any work, they opened the door for more serious investment. Their successors Heritage O&G Limited (Heritage), Hardman Petroleum and Energy Africa, licensed between 1997 and 2004 in different areas, undertook the more expensive seismic surveys and drilling on land and Lake Albert. The first deep wells (Turaco- 1, 2, 3) that were drilled by Heritage in the Semliki Basin between 2002 and 2004 (in Western Uganda) had positive results in terms of encountering some hydrocarbons. This restored the hope of those that had vested their time, money, and, indeed, their lives in this sector. This good news, however, had mixed results as the natural gas tested in the Turaco-3 well was heavily contaminated with carbon dioxide (CO2). The technology to process this gas exists, and both gas and CO2 can be commercially viable. But it is important to appreciate that the focus at this time was the search for oil before options of utilising the gas could be explored further, especially in a frontier basin where no prior discovery had been made. Heritage relinquished this area but was later convinced to acquire a license in Exploration Area (EA) 3A and EA 1, along with a partner, Energy Africa, in 2004.

 

For Hardman Africa, the story was better. Ugandan scientists, who basing on the interpretation of the data acquired, insisted that the next wells are drilled on land in Kaiso Tonya (Hoima district) rather than the lake. It would have taken a longer time and would be more expensive to mobilise the equipment to drill on the lake. Mputa-1 well was drilled in December 2005 and on 6th January 2006, it struck oil and was declared the first commercial discovery in Uganda. Other discoveries made after that were Waraga, Kajubilirizi (Kingfisher), Nzizi, Ngassa, Taitai, Karuka, Ngege, Kasamene, Kigogole, Ngiri, Jobi- Rii, Nsoga, Wahrindi, Ngara, Nsoga, Mpyo, Jobi-East, Gunya, and Lyec. In total, the country has so far made twenty-one (21) discoveries.  

Data Acquisition

To date thirty (30) seismic surveys have been undertaken, resulting in the acquisition of 7,183.66-line kilometres of Two Dimensional (2D) seismic data and 1,596 square kilometres of Three Dimensional (3D) seismic data. One hundred twenty-one (121) exploration and appraisal wells have been drilled, with one hundred and six (106) wells encountering oil and/or gas, which is an unprecedented drilling success rate of over 85%. This includes thirty-nine (39) Exploration and eighty-two (82) Appraisal Wells with thirty-six (36) wells flow tested. In addition, over 10,000 kilometres of geological mapping has been undertaken, and Aerial Magnetic Data, Ground Gravity & Magnetic Data, and Full Tensor Radiometry Data have also been acquired.

Uganda’s First Competitive Licensing Round for New Exploration

During September/ October 2017, the Government of Uganda signed three Production Sharing Agreements (PSA) and issued:

  • One (1) License for Petroleum Exploration, Development and Production over the Kanywataba Contract Area to Armour Energy Uganda Limited (AEUL) from Australia.
  • Two (2) Licenses for Petroleum Exploration, Development and Production over the Ngassa Shallow and Ngassa Deep Contract Areas to Oranto Petroleum Limited (OPL) from Nigeria.

These are the first PSAs to be signed in line with Section 58 of the Petroleum Exploration, Development and Production Act 2013, the legal regime under which the Minister, Ministry of Energy and Mineral Development announced the first competitive licensing round in February 2015.

 

Some of the key provisions of each of the PSA include:

  1. Exploration licenses with an acreage of 344 sq. kilometre (Kanywataba) and 410 sq. Kilometre (Ngassa) for four years split into two periods of two years each.
  2. A minimum work programme which includes acquisition of seismic data and drilling of at least one well.
  3. An Advisory Committee chaired by the Petroleum Authority of Uganda (PAU) and consisting of representatives from Government and the Licensee to review and approve all annual exploration work programmes, budgets, and production forecasts.
  4. Payment of Royalty based on the Gross Total Daily Production in Barrels of Oil Per Day (BOPD). The rate of royalty ranges from 5.5% to 21%.
  5. State Participation by Government or its Nominee at not more than 20%.
  6. The cost recovery limit for Petroleum is set at 65%.
  7. Production Sharing.
  8. A Signature Bonus, together with Research and Training fees and Annual Acreage Rental fees for the First Exploration Period, was paid to the Uganda Petroleum Fund.
  9. A Performance (Bank) Guarantee amounting to 50% of the Minimum Exploration Expenditure for the First Exploration Period.
  10. Taxes will be paid in accordance with the Laws of Uganda; and
  11. A requirement to train and employ suitably qualified Ugandan citizens has been provided for in addition to payment of annual training fees to Government.

Uganda’s first licensing round covered six (6) blocks with a total acreage of 2,674 Km2 in the Albertine Graben, Uganda’s most prospective sedimentary basin. Out of the nineteen (19) applicants at the Request for Qualification Stage, sixteen (16) proceeded to the Request for Proposal stage and four emerged successful bidders and proceeded to the negotiations stage. 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. Eventually, this led to the award of two Petroleum Exploration Licences (PELs) to OPL and the award of one (1) PEL to AEUL. On 26th October 2021, DGR Global Limited acquired an 83.18% interest in Armour Energy International Limited, gaining operatorship of the Kanywataba Contract Area.

Uganda’s Second Licensing Round

Following Cabinet approval, the Minister, Ministry of Energy, and Mineral Development (MEMD) launched the second licensing round for petroleum exploration at the 9th East African Petroleum Conference and Exhibition (EAPCE) in Mombasa, Kenya, in May 2019. The licensing round covered five (5) blocks in the Albertine Graben, namely:

  1. LR2_2019_Block01 (Avivi); Area coverage of 1026km2
  2. LR2_2019_Block02 (Omuka); Area coverage of 750km2
  3. LR2_2019_Block03 (Kasuruban); Area coverage of 1285km2
  4. LR2_2019_Block04 (Turaco); Area coverage of 637km2
  5. LR2_2019_Block05 (Ngaji); Area coverage of 1230km2

The second licensing round was undertaken in three (3) stages, namely, (i) the Request for Qualification (RfQ), (ii) Request for Proposal (RfP), and (iii) the negotiation of the Production Sharing Agreement (PSA).

 

Out of the six (6) applicants at the Request for Qualification Stage, four (4) proceeded to the Request for Proposal stage, and two (2) emerged successful bidders and proceeded to the negotiations of the PSA stage. These included Uganda National Oil Company (UNOC) for the LR2_2019_Block03 (Kasuruban) and DGR Global Limited for the LR2_2019_Block04 (Turaco).

 

The Cabinet approved the award of the Exploration License to UNOC and DGR Global Limited for the Kasuruban and Turaco blocks, respectively. Subsequently, the Government of Uganda and UNOC signed the PSA for the Kasuruban block on 9th January 2023. The block is in western Uganda, straddling Hoima, Buliisa, and Masindi districts. The Kasuruban block is the biggest of the five (5) blocks MEMD announced in the second licensing round.

DGR Global Limited, which owns another exploration license in the Kanywataba Contract Area, signed the PSA for the Turaco block located in Ntoroko district on 12th May 2023.

Maps showing the Status of Licensing for Oil and Gas activities in Uganda