This is the second company to be issued with the licence under the competitive licensing round for oil and gas
Kampala, Uganda | RONALD MUSOKE | Nigerian firm, Oranto Petroleum Ltd, has scooped two production sharing agreements (PSA) and two petroleum exploration, development and production licences over the Ngassa block in western Uganda.
Oranto’s entry into Uganda follows the government’s award of one PSA and an exploration, development and production licence to Australia’s Armour Energy on Sept. 14 over the Kanywataba block in Hoima District, near the Democratic Republic of Congo.
Speaking during the pompous ceremony held at the Energy ministry headquarters at Amber House on Oct.10, Eng. Irene Muloni, the Minister of Energy and Mineral Development said the signing ceremony was a “milestone for the country.”
Muloni said this is the first time Uganda and indeed the East African region is undertaking stratigraphic licensing, where licences are issued vertically over the same block. She said the two exploration licences cover 410 sq km for four years and are split into two periods of two years each.
The Ngassa block, which was initially part of the EA2 licenced 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.
Stratigraphic licensing is done for blocks delineated vertically rather than horizontally and is not uncommon in the oil and gas industry. Examples of countries that have done stratigraphic licensing include Norway and Trinidad and Tobago.
Oranto Petroleum Ltd which is now registered in Uganda under the Companies Act, 2012 has undertaken exploration since 1991 mainly in West African countries and currently has exploration acreage in nine countries including; Equatorial Guinea, Benin, Ghana, Liberia, Namibia, Senegal, Sao Tome & Principe, Nigeria and South Sudan.
Oranto’s taking over of the Ngassa shallow and Ngassa deep contract areas marks the end of Uganda’s first competitive licensing round for oil and gas sector.
Each PSA, Muloni said, has a minimum work obligation together with a minimum exploration expenditure which includes; reprocessing existing seismic data, acquiring new seismic data, carrying out geological and geophysical studies as well as feasibility studies for drilling from the lake with a minimum expenditure of US$2.4 million in the first two years.
The Ngassa licence is offshore and very ecologically sensitive since it has the source of the Nile as part of the basin.
This development comes barely four months since the government said it would undertake fresh due diligence on Oranto Petroleum Ltd before the Nigerian oil company would be granted an exploration licence.
On Oranto’s competence and commitment that the Nigerian firm brings to Uganda’s oil and gas sector, Muloni said, the government did go through due diligence and it was able to confirm the required competences.
“We have the confidence in them and we will live up to them to show these commitments in the work programmes they have signed with the government.”
Muloni said a signature bonus of US$ 800,000 and annual acreage rental fees of US$8,200 for each of the contract area have been paid to the Uganda Petroleum Fund. The research and training fees per year of the first exploration period of US$100,000 for each of the contract areas have also been paid to the Petroleum Authority of Uganda.
She said the government’s total collection from the signature bonus, research and training fees per year, and annual acreage rental fees for the contract areas amount to US$1,816,400.
Meanwhile, a performance (bank) guarantee amounting to US$ 2,443,175 for two PSAs (each PSA worth US$1,221,587) with respect to the agreed minimum exploration expenditure for the first exploration period (first two years) has been provided to the government of Uganda.
The contracts also show that taxes will be paid in accordance with the laws of Uganda and a requirement to train and employ suitably qualified Ugandan citizens has been provided for in addition to payment of annual training fees to the government.
Robert Kasande, the acting Permanent Secretary in the Energy Ministry said the first licensing round was implemented in three stages; the request for qualification stage, the request for proposal stage and the PSA stage and the PSA negotiation stage. These three stages have taken 26 months since the announcement in February 2015.
Prince Eng. Arthur Eze, the Chairman Oranto Petroleum Ltd said Oranto’s coming to Uganda has been partly informed by the secure environment.
Using Oranto’s experience in Equatorial Guinea where the firm had to carry out a similar venture in an equally sensitive environment, Martin Ayuk, the Spokesperson of Prince Eze said Oranto will explore for oil in a safe and sound manner.
Oranto’s investment into Uganda is going to be huge because Oranto has never has shied away from committing to investment wherever the company operates.
The firm will also commit to what it its contracts say but beyond its contract obligations, it will engage the communities.