Muloni Tables Kanywataba Oil Agreement before Parliament signed with Armour
Gov’t earns Shs 1 bn in signature bonus for Kanywataba oil block
Government of Uganda signed a Production Sharing Agreement (PSA), and issued a License for Petroleum Exploration, Development and Production over the Kanywataba Contract Area with Armour Energy Limited (AEL) from Australia. The exploration license was signed on Thursday, September 14 at Amber House in Kampala. Energy Minister, Irene Muloni signed on behalf of government, while Armour Energy Limited was represented by its Chief Executive Officer. The Kanywataba Contract Area is located in Ntoroko district.
Eng. Irene Muloni, Minister of Energy and Mineral Development said, “This is the first Production Sharing Agreement to be signed in line with Section 58 of the Petroleum Exploration, Development and Production Act 2013, the Legal regime under which I announced the First Competitive Licensing Round during February 2015” Muloni said.
She added, “A signature bonus together with research and training fees, and annual acreage rental fees for the first exploration period amounting to US$ 316,000 have been paid to the Uganda Petroleum Fund”.
The Kanywataba exploration license has an acreage of 344 square kilometers for four years split into two periods of two years each. Muloni said, a minimum work program which includes acquisition of seismic data and drilling of at least one well.
Muloni said, the PSA provides for a requirement to train and employ suitably qualified Ugandan citizens has been provided for in addition to payment of annual training fees to government.
“The award was cleared by Cabinet and the Ministries of Finance, Planning and Economic Development together with that of Justice and Constitutional Affairs. The Minister also said that on Friday 8th September 2017, Cabinet approved the award of two licenses in the Ngassa block and that the agreements would also be signed in a few weeks’ time,” Muloni said.
Weighing in on the exploration license, Robert Kasande, the acting Permanent Secretary, Ministry of Energy and Mineral Development, added that one of the major achievements from this licensing round was the development of a state of the art data room which remains open to the industry to view and purchase data, and will also be used for future licensing rounds.
“The Ministry was able to generate $ 2.4 million United States dollars (Approximately Shs 8 billion) from the sale of data to bidders which was paid to the Uganda Petroleum Fund”, he said.
Uganda’s first licensing round covered six blocks with a total acreage of 2,674 Km2 in the Albertine Graben, Uganda’s most prospective sedimentary basin. Out of the nineteen (19) applicants at the Request for Qualification Stage, sixteen proceeded to the Request for Proposal stage and four emerged successful and proceeded to the negotiations stage. This first licensing round was undertaken in line with the National Oil and Gas Policy for Uganda (2008) and in accordance with the Petroleum (Exploration, Development and Production) Act 2013.
The signing of a Production Sharing Agreement and an award of exploration license bring the number of companies in Uganda’s petroleum industry to four – Total, Tullow, Cnooc and now Armour Energy Limited.
PSA tabled before Parliament
Later, in a move to enhance transparency in the oil and gas sector, the minister tabled before Parliament Production Sharing Agreement (PSA) signed between the government of Uganda and Armour Energy Limited – Australian oil company, over Kanywataba oil block in Ntoroko district.
The oil sector unfortunately remains shrouded in secrecy. The previous Production Sharing Agreements between government and oil companies have been under key and lock and neither accessible to Parliament not the public. A court case filed by two journalists Charles Mwanguhya Mpagi and Angelo Izama to have the oil agreements made public didn’t yield any results.
The Minister also tabled before parliament the Intergovernmental Agreement between the government of Uganda and the United Republic of Tanzania on the crude oil pipeline outlining the contents of the agreement.
Under the Petroleum Act, 2012, the Minister of Energy and Mineral Development is mandated to furnish parliament with periodic reports about the oil and gas sector.
After tabling the report, the opposition Chief Whip Ibrahim Semujju Nganda moved a motion that the report be differed for further consideration. “We shouldn’t rush through a report of this significance to the country. It is important that Members of Parliament discuss the report, when the atmosphere is peaceful and conducive for discussion not that of intimidation,” Semujju who is also the Kira Municipality MP said.
On his part, Stephen Birahwa Mukitale (MP Bulisa), dismissed Muloni’s report as lacking. “The report is devoid of figures, it is devoid of the budget, deadlines, how can we talk of oil and even have first oil by 2020 without a budget and deadlines,” he wondered.
He added, “We need a matrix spelling out the role, budget and responsibility of each and every ministry and department in the oil sector, because this is a multi-sectoral sector, if we are to have first oil by 2020,” Mukitale proposed. Kadaga asked the minister to avail the matrix to the committee.
He said it is wrong for the Minister of Energy and Mineral Development to purport to speak for the Ministries of Water and Environment, Works and Transport and Uganda National Roads Authority (UNRA) and accused the minister of lack of coordination. “There is no road contractor in Bulisa, don’t take us for granted. Other ministries don’t have a budget for oil and gas activities. The president talked about a budget cut of 10 percent from every ministry to finance oil and gas activities, where is that money,” he wondered.
Prof Morris Ogenga Latigo (MP Agago North) wants the previous oil agreement to also be tabled before parliament and MPs allowed access. “I wish the minister could table Production Sharing Agreement for oil blocks where we have already discovered oil,” Ogenga wondered.
Ogenga who is also the chairperson of Acholi Technical Working Group on oil and gas implored fellow lawmakers to read and scrutinize the Kanywataba Production Sharing Agreement warning them that if parliament doesn’t provide oversight for the sector, then the country would be in trouble.
Speaker, Rebecca Kadaga, referred the Minister’s report and the Kanywataba oil agreement to the Committee on Natural Resources to scrutinize the report and report back to parliament. However, no time line was given on when the committee is supposed to report.
About Armour Energy
Armour Energy Limited focuses on the discovery and development of natural gas and associated liquid resources in Australia. Armour Energy Limited was founded in 2009 and is based in Brisbane, Australia. It has 100% interests in the McArthur, South Nicholson, and Georgina Basins covering an area of 33 million acres in the Northern Territory and Queensland; and interests in the onshore Gippsland Basin, Victoria in joint venture with Lakes Oil NL. The company, through its subsidiaries, also holds interests in 7 exploration permits for minerals in Queensland among other oil and gas exploration works.
The three joint venture partners operating in the Albertine Graben have launched the Front End Engineering Design (FEED) studies for Nwoya and Buliisa oil fields in a bid to fast track oil production by 2020. Total E&P Uganda , Tullow oil and China National Offshore Oil Corporation (CNOOC) signed the pact yesterday (February 14, 2017) at Sheraton Hotel in Kampala and was witnessed by Minister for Energy Eng. Irene Muloni, Mike Cleaver Vice President of Chicago Bridge and Iron Company(CBI) , Ashley Rees Managing Director of Fluor and Maxine Mikoyan Vice President of Technip.
Technip, Fluor and Chicago Bridge and Iron Company (CB&I) are the three international contractors that were awarded the contract to undertake the first phase of FEED design completion for a period of six months. Upon successful completion, the two best companies will be invited to compete for Engineering, Procurement and Construction contract. The FEED studies which will cover Exploration Area 1 (EA1) in Nwoya and Exploration Area 2 (EA2) in Buliisa respectively are expected to outline technical aspects of the oil fields (design of trunk pipelines-crude feeder pipelines, Central Processing Facilities which is the most critical infrastructure since it is like ‘first refinery’ and other attendant infrastructure), costs estimates and schedules of implementation of the production phase. According to Energy Minister, Eng. Irene Muloni, who was present at the signing of the design engineering studies framework, Uganda’s target of having first oil remains 2020. “We gave the joint venture partners up to the end of this year (December 31, 2017) to make a Final Investment Decision (FID); a decision on whether to invest or not to invest in our country,” she said, adding that government expects the oil companies to abide by the agreed deadline as penned on the production licenses awarded last August. “Joint venture partners have sunk in over $ 3 billion for the last 10 years. So they are also looking forward to recouping their investment and everyone is asking government why it is taking us forever to get out oil out of the ground,” she noted. Therefore, Final Investment Decision (FID) by the end of 2017, and ‘first oil’ by 2020, must become a reality, Muloni emphasized.
Speaking on behalf of the joint venture partners, General Manager Total E&P Uganda, Adewale Fayemi explained that FEED studies will allow the joint venture partners to make a Final Investment Decision (FID) before the end of this year as per the contracts signed with government of Uganda. “This is a milestone in the country’s journey towards oil production by 2020. We are currently preparing a call for tender for enabling infrastructure design work which is expected to be awarded in May, 2017,” Adewale told Oil in Uganda. He further revealed that the FEED studies will however not include the kingfisher area operated by CNOOC-this is yet to be launched.
The enabling infrastructure are works required ahead of major engineering and construction work including local access, site preparation, fencing and similar tasks for which Ugandan companies are expected to be involved. Exploration Area 1 and 2 will require at least one CPF located in Buliisa district and will have capacity to produce 200,000bpd. The second CPF will be located in the Kingfisher area and will capacity to produce 30,000bpd. In total, the country expects to produce 230,000 barrels of oil per day, out of which the refinery will require 30,000 barrels while the 200,000 barrels will be exported through the East African Crude Oil Pipeline. Last month, the governments of Tanzania and Uganda launched the Front End Engineering Design (FEED) study for the East African Crude Oil Pipeline Project ( EACOP) which is expected to be completed after eight months.
Report by Edward Ssekika.
The Democratic Republic of Congo (DRC) has formally expressed interest to join the East African Crude Oil Pipeline Project (EACOP), Oil in Uganda has established.
Uganda and Tanzania plans to construct a 1,445 km long, 24-inch diameter, heated pipeline to provide access for Uganda’s crude oil to the international market.
Uganda’s Minister of Energy and Mineral Development, Irene Muloni noted that Democratic Republic of Congo government is considering EACOP as an alternative route to access the international market for its crude from newly discovered oil resources in the eastern part of the country.
“The DRC government has formally expressed interest to join crude pipeline project. They see it [EACOP] as an alternative route for their crude to the market,” she said, while launching the Front End Engineering Designing (FEED) for the crude oil pipeline project recently.
An American Company Gulf Interstate is conducting the FEED study that is expected to provide the actual designs, costs and route for the crude oil pipeline. The study that was launched early January 2017 is expected to be completed within 8 months.
Muloni explained that when they (Uganda and Tanzania team) was inspecting the Tanga port last year, they were joined by an official delegation from the Democratic Republic of Congo’s Ministry of Hydrocarbons, and the delegation expressed interest to participate in the crude oil pipeline project.
“This is potential route for them to access the international market,” she explained. This means DRC government, if admitted will be expected to acquire a stake in the EACOP and pay a tariff of $ 12 dollars per every barrel of crude oil transported through the pipeline.
The Democratic Republic of Congo (DRC) has so far discovered 3 billion barrels of oil around Lake Albert Eastern and part of the country, which neighbors Uganda. However, it is yet to be confirmed how much of the 3 billion barrels is recoverable. It is therefore cheaper for DRC to transport its crude through EACOP and the Alternative being construction of a 6,500 kilometer long pipeline running though the vast jungles to the country’s western coast line.
Last year, Giuseppe Cicarelli, the Chief executive officer of Oil of DRCongo, one of the companies exploring for oil in Eastern DRC, said access to the least cost option to get crude to the international market is vital to the next round of investment the company is supposed to make.
“Oil of DRCongo is actively working to find viable solutions for the future evacuation of the crude oil from block I and II of Lake Albert, having already completed an extensive seismic campaign,” he said. Oil of DRCongo, operates two blocks around Lake Albert.
DRC’s expression of interest follows, President Museveni recent appeal to his Congolese counterpart, Joseph Kabila to consider joining the northern corridor projects, in particular the East African crude oil pipeline.
French oil giant, Total S.A is one of the companies exploring oil in northeastern DRC. Total holds 66 percent stake in Block 3, located along Lake Albert alongside with South Africa’s SacOil.
Total ‘has 54.9 majority stake in Uganda’s’ following a partial farm- down with Tullow, though the transaction awaits government approval. With oil exploration activities in DRC, a controlling stake in Uganda’s oil fields and interests in Tanzania’s oil exploration activities, it makes economic sense for the company to push DRC government to join EACOP.
Total has already indicated its willingness to finance to the crude oil pipeline is likely to be the biggest financier of the crude oil pipeline.
Report by Edward Ssekika
President Yoweri Museveni has defended the ‘oil cash bonanza’ in which 42 top civil servants and government officials were rewarded Shs. 6bn for their role in defending the oil tax cases in both Uganda and London.
The President said the oil cash bonanza; now commonly known as ‘presidential golden handshake’ was deliberate and did not break any law.
“I reject that I did anything wrong. I’m very proud of these young people,” he reportedly told National Resistance Movement Members of Parliament on Tuesday while addressing a caucus meeting at State House Entebbe.
In anticipation of a heated debate in parliament over the oil cash payouts, Museveni said that the Tullow-Heritage case was no ordinary case and castigated Members of Parliament for insulting ‘good people’.
“It was an international war, which the lawyers and the tax ladies [Ms. Allen Kagina and Ms. Akol Doris won amidst pressure, challenges and the temptations that they faced,” he said.
Other officials who benefited from the ‘presidential golden handshake include; former Permanent Secretary in Ministry of Energy, Fred Kabagambe Kaliisa, former URA’s head of legal affairs and ED KCCA, Jennifer Musisi, Secretary to the Treasury Keith Muhakanizi, former Attorney General Peter Nyombi and his deputy, Fred Ruhindi, Lawrence Kiiza from Ministry of Finance, Ernest Rubondo, the Executive Director of PAU, Francis Atoke, the Solicitor General, lawyers; Ali Ssekatawa (URA), Martin Mwambutsya (then State Attorney), Peter Muliisa among others.
Museveni told Mps that during court proceedings of the case, he was approached by many people who advised him to settle the issue outside court, because Uganda was likely to lose a lot of money. He explained that he was strengthened by the Ugandan team that they were going to win the case – and it was through that background that he decided to thank the team.
“If the support staff were part of the big war that saved Uganda trillions and gained $ 451m, if they get shs,50 million for their first time in life, it is okay. It was their luck and they were part of the war,” Museveni told Mps.
He defended his action arguing that in the last 30 years, he has given a monetary ‘handshake’ twice.
He explained that the first ‘golden handshake’ was in 2006 when he gave out $20,000 to a group of scientists in the Ministry of Energy and Mineral Development when they discovered oil and the second one being the Oil cash bonanza.
However, he said the only thing that could have gone wrong is that the list of beneficiaries could have been inflated behind his back.
“Perhaps there is a possibility that the list of beneficiaries was infiltrated and other names included. This has to be investigated,” he noted.
Report by Edward Ssekika.
Tullow Oil PLC has entered into a substantial farm- down of 21.57 per cent of its 33.33 per cent shares in the Exploration Areas in all the Lake Albert Project licenses in EA1, EA1A, EA2 and EA3A to Total E&P Uganda B.V.
The London-based company yesterday announced that a Sale and Purchase Agreement with an effective date of January, 1st, 2017 will allow Tullow retain an 11.76% interest in the upstream and which would reduce to 10% when the Government of Uganda formally exercises its right to back-in.
“This agreement is based on the transfer of licence interests from Tullow to Total in exchange for cash and deferred consideration to be paid as, and when the Lake Albert Development Project reaches a series of key milestones, and represents a reimbursement by Total of a portion of the Tullow’s past exploration and development costs,” partly reads the press statement from Tullow. According to a press statement issued by Total E&P, this transaction will give Total a 54.9% interest, strengthening its position in this competitive project and paving the way for a project sanction in the near future.
“Following the agreement on the Tanzanian export pipeline route, this transaction gives Total a leadership position to move this project efficiently toward FID in the current attractive cost environment, while providing strong alignment and a pragmatic financing scheme for our partner Tullow,” said Patrick Pouyanné, Total Chairman and CEO adding that the increased share in the Lake Albert project will bring significant value to Total and fits with our strategy of acquiring resources for less than $3 per barrel with upside potential.
Aiden Heavey, Tullow Oil Plc Chief Executive Officer (CEO), said the company will remain an active player in Uganda, “Today’s agreement will allow the Lake Albert Development to move ahead swiftly, increasing the likelihood of Final Investment Decision (FID) in 2017 and first oil by the end of 2020. I’m particularly pleased that Tullow’s long-term commitment to and presence in Ugandan is guaranteed by this transaction and that we will remain an active investor in Uganda’s oil and gas sector,”
He added, “The deal will secure future cash flow for the group from one of the industry’s few truly low cost development projects without any additional cash requirements expected. We will work closely with the government of Uganda, its associated agencies and with Total and CNOOC to move this transaction forward as smoothly as possible over the coming months.”
The farm down is likely to raise once again tax disputes. Of recent, such disposals have attracted Capital Gains Tax (CGT) which has been a center of oil litigations between government and the International Oil Companies.
Both companies strongly assert that completion of farm dawn is subject to approval from government of Uganda.
“Once this transaction is completed, Tullow will cease to be an operator in Uganda but will retain a presence in-country to manage its non-operated position,” the press statement notes.
The Lake Albert Development Project is a major development which expects to achieve around 230,000 barrels per day at peak/plateau production.
Report by Edward Ssekika
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