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Energy ministry evaluates two bidders for three oil blocks in the Albertine graben

Oil exploration in the Albertine graben

Kampala, Uganda | THE INDEPENDENT | Only two oil and gas firms submitted bids for the second oil and gas licensing round for the exploration of five blocks in the Albertine graben.

One of the companies whose bids is being evaluated is DGR Global which owns majority stake in Armour Uganda-an Australian firm exploring oil in Kanywataba block.

While the Energy ministry had shortlisted four companies to bid for new oil blocks, URN learnt that some of those including Total and its partner CNOOC, did not submit the bids by close of the bidding at the end of June.

The Ministry of Energy had shortlisted Total E&P Activites Petrolieres, France; DGR Global Limited, Australia; Uganda National Oil Company Limited (UNOC) and a joint venture of PetroAfrik Energy Resources East Africa Ltd, Uganda and Niger Delta Petroleum Resources Ltd from Nigeria.

CNOOC had through Total joined the process when the ministry hosted the bidder’s conference in June. The manager of the second licensing round, Frank Mugisha revealed in an interview that only two bidders submitted bids for three out of the five blocks under offer.

The two companies whose bids are being evaluated include Uganda National Oil Company and Australia-based DGR global. The blocks which have so far attracted bidders include Turaco, Omuka in Nebbi and Kasuruban stretching between Buliisa and Packwach.

According to Mugisha, the evaluation of the bids is expected to be concluded by second week of September and that negotiation with successful bidders should be concluded before end of December 2021.

The conclusion of negotiation will lead to the award of three exploration licenses in the Albertine graben. The second licensing aims to increase international investment into Uganda’s oil rich energy sector. The second licensing round has been greatly affected by the outbreak of COVID-19 pandemic.

Government had hoped to sign Production Sharing Agreements and issue exploration licenses to successful firms by December 2020, but the process had to be postponed because of low interest from prospective investors.

There was excitement within the Ministry of Energy when French oil giant, Total and Chinese –CNOOC expressed interest in the new competitive bidding round. CNOOC’s participation was particularly hoped to bring expertise in drilling offshore.

In oil and gas extraction, “offshore” refers to the development of oil fields and natural gas deposits under the ocean. In Uganda’s case, oil exploration and possible drilling will be conducted along Lake Albert on Uganda-DRC border.

A source knowledgeable about oil and gas exploration told URN that she was not surprised of the fact that Total did not summit for bids under offer.

“Total is likely to come in at a later stage when the smaller companies have made discoveries. Remember that Total came in after when we were issued production licenses.” said the source that asked for anonymity

While it is not automatic that Uganda National Oil Company or DGR Global will be chosen for the three blocks, the source indicates that DGR’s interest in Uganda’s oil and gas sector will be vital given its interest not only in oil and gas but in energy and minerals globally.

DGR Global currently has 83.18% in Armour Energy Uganda held through an equity stake while Armour has a 16.12% stake in the project. DGR Global Chief Executive Officer, Nicholas Mather in July hinted about the company’s interest in Uganda’s minerals as well.

He said forecasts for oil and gas, as an energy resource remains strong through 2040 under International Climate Change scenarios. DGR global owns 17% stake in Armour Uganda’s oil project.

Armour Energy this month said it is restarting its 2D seismic programme in Uganda, two years after it declared force majeure. The company stopped operations in October 2019 following disruptions in the Kanywataba contract area block. Its activities were further affected by the COVID-19 pandemic.

Mather said the Kanywataba block is a highly prospective oil and gas project that could bring in substantial resources for the company.

Armour expects the government to add the time under force majeure to its contract. The license had been due to end on September 13 this year. Because of force majeure declaration, the license should run to the end of next year. DGR Global lists Uganda as a low risk destination for world class onshore oil discoveries.



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