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Uganda to issue two oil licences as one prospector bows out

Tuesday June 20 2017
oil rig

An oil in western Uganda. FILE PHOTO | NMG

By HALIMA ABDALLAH

Uganda is set to issue two licences for exploration of oil in the country but will be forced to go back to the drawing board after one shortlisted bidder ceded its interest in the blocks.

Sources said the licences would be issued to a Nigerian and Australian company, two of the three that were picked to negotiate exploration terms with the government.

It is understood WalterSmithPetroman Oil Ltd, which had been picked for the Turaco block, had ceded its interest apparently after failing to get shareholder approval.

“We are expecting two production sharing agreements and not three, because one of the companies pulled out after the shareholders did not approve the transaction,” said a source.

The exit of the Nigerian company means a consortium comprising Oranto and Niger Delta Petroleum Resources is the only other Nigerian bidder in the running. The consortium was prequalified for the Ngassa block.

Reports quoting unnamed officials last week indicated Oranto had agreed with the government paving the way for the signing of a production sharing agreement.

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Australian prospector Armour Energy Ltd which was to negotiate for the Kanywataba Block is also expected to be licensed. The government had promised to name the licence winners by the end of this month.

READ: Cautious excitement as Uganda issues oil licences

The licences would be significant for Uganda in view of the low crude oil prices in international markets that have forced many companies to halt production. However, the government sees this as an opportunity for less costly exploration.

Total E&P has also submitted its final application for a production licence for the Lyech field. Eight production licences have so far been issued.

In a related development, the race to construct the 60,000 barrels per day oil refinery at Hoima has been left to two firms. According to sources, the two companies will now negotiate project framework and implementation agreements before the winner is announced by the end of July. Uganda and its EAC partners will have shares in the refinery through the Uganda Refinery Holding Company, a subsidiary of Uganda National Oil Company.

The exit of WalterSmithPetroman Oil Ltd could see the Turaco block floated in the next round of licensing. Alternatively, Uganda can invite the companies that missed out to renew their interest for consideration.

In August 2016, the government had said it would negotiate five production sharing agreements with four companies and issue exploration licences upon successful negotiation for the Kanywataba block and two for the Turaco and Ngassa blocks respectively.

The listed companies were Armour Energy Ltd, WalterSmithPetroman Oil Ltd, Oranto Petroleum International Ltd and Niger Delta Petroleum Resources Ltd.

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