Uganda signs oil exploration deal with Australian firm DGR Global

Friday May 12 2023
tullow oil workers

Tullow Oil workers at a rig in Buliisa in Uganda. PHOTO | FILE | NMG


Uganda has signed a petroleum sharing agreement with Australian firm DGR Energy for the Turaco exploration area in the country’s Albertine rift, raising to four the number of companies with licences to prospect the basin for more oil.

Uganda’s Permanent Secretary in the Ministry of Energy Irene Batebe told journalists on the side-lines of the 10th East African Petroleum Conference and Exhibition (EAPCE) in Kampala, that the country is keen to find more oil to feed the planned refinery and for export.

Turaco is a 637-square kilometre exploration area located on the southern tip of Lake Albert, for which the company will pay signature bonus, rental acreage and research and training fees.

DGR Energy and state-owned Uganda National Oil Company (Unoc) are the latest upstream entrants in the race to find more hydrocarbons, with Nigerian firm Oranto Petroleum, and Armour Energy – a subsidiary of DGR Global – having signed deals to venture into the business in 2017.

In January, cabinet approved exploration licences for Unoc for Kasuruban, a large oil block located in three districts of Buliisa, Hoima and Masindi, and for DGR in Turaco, located in Ntoroko district.

Unoc subsequently signed a petroleum sharing agreement with the government for the 1,285sqkm Kasuruban exploration area, over which the company – a novice in upstream activity – is negotiating with China National Offshore Oil Corporation to explore jointly, leveraging on the Chinese firm’s financial muscle.


Read: Uganda keeps oil dream alive

The firm paid $100,000 as signature bonus and an annual acreage rental fee of $25,700 that was deposited in the Petroleum Fund, including research and training fees totalling to $30,000 – all mandatory before a licence is granted.

Unoc is the government-owned company that represents the country’s commercial interests in oil and gas projects. It owns a 15 percent stake in the upstream projects Tilenga and Kingfisher, as well as in the East African Crude Oil Pipeline (Eacop).

Uganda is developing a 60,000 barrels per day capacity refinery to serve the domestic and regional market, but local consumption of refined petroleum products stands at 45,000 barrels per day, and 200,000 barrels per day for the region.

“What this means is that we need more oil discoveries if we are to meet the regional demand, which also requires that in future we will have to upgrade the refinery’s capacity,” Batebe said.

In January, Energy Minister Ruth Nankabirwa indicated that her ministry targeted this year’s petroleum conference to invite investors to scramble for new exploration areas.

But amid the search for more hydrocarbons to feed the proposed refinery, Uganda has shelved plans to announce the third licensing round to “finalise consultations on five blocks for the next round,” Batebe explained.

A government official told The EastAfrican that internal assessment compelled the government to shelve the offers based on lukewarm interest from investors during the previous rounds.

Insiders further said that the ministry wants to “first fix complex issues of blocks” like Ngaji – located in the sensitive ecosystem that hosts the mountain gorillas – alongside Omuka and Avivi exploration areas, which were in the previous licensing rounds but were not allocated takers and which are to be re-tabled in future bidding rounds.

Read: China takes over Eacop funding

Development phase

For the already discovered 6.5 billion barrels of oil, Uganda has entered the critical development phase after the joint venture partners in February 20222 announced the Final Investment Decision to sink $10 billion in production and crude transportation infrastructure, targeting first oil in 2025.

However, ambivalence among the big global oil and gas companies remains due to sustained campaigns by human rights and environmental activists against the oil projects. This has seen major banks and insurance companies shun financing and underwriting of the $5 billion Eacop project.

In 2017, Uganda picked Nigerian firm Oranto Petroleum and Australia’s Armour Energy from its first-ever licensing round for exploration of Ngassa and Kanywataba respectively.

From the second licensing round that kicked off in 2019, Unoc and DGR Energy were selected.