Oil and Natural Gas in Uganda

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"We've struck oil, Uganda Minerals Minister announces" (Source: Mining Weekly)

"Tullow Oil under pressure to build a refinery in Uganda"

Although Uganda had no proven oil or gas resources, renewed exploration efforts are taking place, and there are signs that the western Rift Valley may contain considerable hydrocarbon deposits. In September 2002, following a link up with South Africa's Energy Africa Ltd, Heritage Oil Corporation of Cananda announced that exploratory drilling operations had begun in Block 3, located in the Semiliki Valley in western Uganda. This is the first petroleum well drilled in the country, and is intended to confirm the results of Heritage's seismic studies from 1999. That survey at Turaco-1 site, revealed a potential of 1.2 billion barrels of oil in the Semliki Valley as well as the Pakwach basin area, northern and southern Lake Albert basin, and Lake George basin area. Heritage began drilling a second well at Semiliki in the last quarter of 2003. TotalFinaElf of France, RSM Production Corporation of the United States and Australia's Hardman Resources also showed renewed interest in the five exploration blocks in Western Uganda.
  • Oil reserves are estimated at 250 million barrels by Tullow Oil plc, the parent company of Hardman Resources, one of the companies conducting petroleum exploration in Western Uganda. Hardman has discovered oil at two wells-Waraga and Mputa-1-both located in Exploration Block 2 in Hoima district in Western Uganda. A third well, Nzizi, is yet to be flow tested but the company, encouraged by the results from the other two wells, is hopeful it will strike oil there too. The company also owns 50 per cent shares in Block 3 where Kingfisher-1 and Kingfisher-1A wells were drilled (on the Lake Albert shores). Oil was also struck at both of those wells; 13,893 barrels of oil per day during flow testing.
  • Heritage Oil Corporation is the operator and has a 50% interest in two exploration licenses in Uganda (Blocks 3A and 1). The Kingfisher deviated well in Block 3A was drilled to a total depth of 3,195 metres, which was close to the limit of the rig’s operational capability. Four intervals were tested successfully in the Kingfisher well, resulting in an overall cumulative maximum flow rate of 13,893 bopd through a one inch choke. A shallower interval, at a depth of 1,783 metres, was tested in November 2006, producing 4,120 bopd over a 10 metre interval and three intervals tested in February 2007, from between 2,260m to 2,367m, produced a cumulative maximum flow rate of 9,773 bopd over a total net productive thickness of 44 metres. The oil is good quality light (between 30° and 32° API) and sweet with a low gas-oil ratio and some associated wax.
Source: Tullow Oil

  • Dominion Petroleum Ltd has a license - 2,021 square kilometres (0.50 million acres) in Uganda (Block 4B) - in the Albertine Rift Basin. The company has commenced environmental impact work prior to undertaking acquisition of 500km of 2D-seismic in Block 4B during mid-2008. This seismic would fulfill the Company’s commitments under the first period of the PSA of two years.

Uganda: Govt Dashes Bunyoro Hopes of Oil Wealth

East African (Nairobi)

18 September 2007
Posted to the web 18 September 2007

David Malingha Doya

Bunyoro region's expectations of receiving the lion's share of proceeds from oil finds in Uganda are unlikely to be realised following a radical amendment of the country's still unpublished national oil and gas draft policy that will see the much anticipated mineral wealth being managed as a national asset.
Sources close to the process say the decision is informed by the Nigerian experience in the Niger Delta and the perception that conflict could erupt in the country over perceived favouring of some regions.
The Nigerian case has deteriorated into an armed crisis claiming many lives among the native Ogoni community, security agencies and expatriates employed in the multimillion dollar oil exploration industry. Local gangs in the Delta have targeted multinational companies operating in the region, burning installations and destroying equipment on the grounds that their communities are being deprived of their rightful share of the oil wealth.
The decision came just after the World Bank released its Country Economic Memorandum: Uganda Moving Beyond Recovery, which takes stock of the country's past growth, examines constraints to growth and recommends ways to maximise prospects for future growth.
The prospect of exploiting the oil for economic development dominated the first day of a meeting held to discuss the report, where stakeholders from the public and private sectors and the donor community all seemed agreed on the desirability of managing the deposits as a national asset.
Finance Minister Dr Ezra Suruma said, "There are two schools of thought - those who think that discovery of oil will cause chaos and those who say it gives Uganda an opportunity for faster growth. We are aware of both possibilities but we are sure that we shall manage the resource well for faster economic growth and development of the whole country."
Last year, Australia's Hardiman Resources and its UK-based partner Tullow Oil announced from preliminary tests the presence of substantial oil deposits around the shores of Lake Albert in Western Uganda.
Since then, some Ugandans from the areas where the exploration wells are located have been seeking assurances from the government that their interests will come first.
A high ranking official from the Bunyoro-Kitara Kingdom, under whose land the oil lies, said in July last year that people in the area would not stand to see the oil benefiting people elsewhere while they themselves continued living in chronic poverty.
The kingdom urged the government to at least provide social services like health centres, schools and paved roads in the region to pre-empt local hostility to the oil drilling.
Other communities in the Albertine region followed suit, saying that the deposits from which the oil was drilled in Bunyoro were likely to extend to nearby regions like the Toro Kingdom and western Lango and Acholi regions.
William Oketcho, chairman of the Parliamentary Budget Committee, said that since actual drilling is still a couple of years away, all this excitement in the oil-bearing regions is uncalled for. Indeed, some people are already rushing to buy land underneath which the oil deposits are thought to extend in the hope that they will be compensated heavily when it comes to drilling.
During the World Bank meeting, Prof Paul Collier, director of the Centre for the Study of African Economies at Oxford University in the UK, said, "If you decide to manage oil as a national asset, you must be transparent and accountable."
Prof Collier, the author of several books on Africa, assessing the possibilities of an oil boom helping to accelerate growth in Uganda, outlined four key steps to ensuring the nation benefits from a natural resource.
He said, "The four steps include issuing rights - here, I recommend an auction; working out royalties; saving proceeds; and carefully investing the oil money." Currently, the government of Uganda has contracted Hardiman Resources to do preliminary tests before the real business of drilling starts, whereupon the issue of rights will surface.
There has been talk about royalties, but the government has yet to reveal how much the country will get and has kept the Production Sharing Agreement secret. It is however understood that, globally, 60 per cent of revenues to the government is a good deal. Analysts point to Zambia as an example of a country that ended up getting a raw deal for its copper because of poorly worked out royalties.
On saving and investing the proceeds, the Norwegian model was cited - the country has been putting billions of dollars from oil proceeds in offshore assets such as securities on the New York Stock Exchange to pre-empt inflation caused by oil money.
However, Prof Collier said Norway was not the right model for Uganda.
"It is better for the money to stay in the economy of Uganda, because it is one of the most capital-poor countries, unlike Norway, which is capital-rich," he said.
Prof Collier instead advised that the oil money be invested in construction and other carefully selected projects.

The Curse of Oil in the Great Lakes of Africa

-Joseph Yav, senior researcher at the Institute for Security Studies.

Uganda and the DRC share Lake Albert, which has become an important new frontier in the search for oil on the continent. Lake Albert, also Albert Nyanza and formerly Lake Mobutu Sese Seko, is one of the Great Lakes of Africa. It is Africa's seventh largest lake, and ranks as the world’s twenty-third largest lake by volume. It is located in the center of the continent, on the border between the DRC and Uganda. It is the northernmost of the chain of lakes in the Great Rift Valley; it is about 160 km long and 30 km wide, with a maximum depth of 51 m, and a surface elevation of 619 m above sea level. In 1864, the explorer Samuel Baker discovered the lake; he named it after the deceased Prince Albert, consort of Queen Victoria. The late and former Congolese president Mobutu temporarily named the lake after himself.

Conflict is arising over oil found in Lake Albert. Reserves are estimated at less than 100,000 barrels a day for about 10 years when production starts. Tensions began to rise at the end of July, 2007, beginning of August, 2007, when a unit of Congolese Armed Forces (FARDC), captured four Ugandan marines who had apparently strayed towards the Congolese west bank of Lake Albert. But on August 3, the situation grew serious. FARDC soldiers patrolling the lake attacked an oil exploration barge belonging to Canada's Heritage Oil Corporation and killed a British contractor working for Canada's Heritage Oil Corp. The Ugandan army retaliated and a Congolese soldier died in the short shoot-out while a Ugandan soldier was wounded.

Since then, tension has been mounting along that part of the Uganda-Congo frontier that runs north-south down the 160 kilometre-long lake - although the alignment of the border has never been precisely defined. Following the discovery of oil in the Albertine Basin, both the Ugandan and Congolese armies have been deploying heavily around the shores, with some observers saying there is now a threat of all-out war.

To ease the tensions, Congolese president Joseph Kabila and his counterpart, Ugandan president Yoweri Museveni, held a one-day summit meeting in Tanzania on September 8 in an attempt to sort out the border dispute. They signed an agreement to immediately pull back their troops 150 kilometers from the border to ease tensions over an oil-rich border lake. They agreed to work together to explore and exploit oil in the Lake Albert area and to lay a joint pipeline to distribute any oil and they signed the agreement in the presence of Tanzanian President Jakaya Kikwete, diplomats and journalists. They also agreed that a joint team will begin work to demarcate the contested area of the lake. Further, they agreed to meet once a year and to raise their diplomatic missions to ambassadorial level to help improve relations.

However, few days after the meeting and agreements another military clash erupted on the lake on September 24. Reuters reported that six civilians were killed when Ugandan soldiers opened fire on a Congolese passenger boat on Lake Albert. In a conflicting version of the shooting incident, Uganda's military reported two soldiers killed, one from each country, in what it said was a gunfight during a dispute over an oil exploration vessel working on the border lake.

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