Tullow Oil PLC announces a promising oil discovery in the Ngamia-1 exploration well drilled in Kenya’s Turkana County, close to the border with Uganda. A company statement says the find was “beyond our expectations” and that “many leads and prospects similar to Ngamia have been identified.” Kenya thus appears quite likely to join the ranks of oil producing countries.
Oil in Uganda goes online.
Neptune drills a third exploration well, Mvule-1, in Exploration Area 5 (Rhino Camp basin, West Nile). The well does not discover oil or gas.
President Museveni makes a two-hour speech to parliament defending the recent signing of oil contracts with Tullow, and saying that Uganda will take at least 76.2 per cent of revenues deriving from oil. Opposition MPs boycott the address. Some MPs threaten to take the government to court over the signing of the contracts, and ask the Speaker to strike the President’s address from the parliamentary records.
Two oil bills are tabled in parliament: the Petroleum (Exploration, Development and Production Bill) 2012 and the Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012. According to Uganda’s parliamentary procedure, the standing Natural Resources Committee will spend 45 days examining the bills and consulting with stakeholders, will make any revisions they see fit, and will then submit the bills to parliament for a ‘second reading’ and vote.
Tullow signs two production sharing agreements with the government in what is seen as a green light for the company’s farm-down deal with China’s CNOOC and France’s Total. The agreements cover the 3,000 km2 Exploration Area 1 in the Pakwach Basin and the 170 km2 Kanywataba Prospect in Ntoroko District (which was carved out of Bundibugyo District in 2010).
Tullow is also awarded a production licence for the 344 km2 Kingfisher field in Hoima and Kibaale Districts. According to international press reports, these agreements hinged on Tullow accepting changes to “stabilisation clauses” in earlier contracts. Reuters quotes Energy Minister, Irene Muloni, as saying that Tullow has also “agreed to the government’s policy of establishing a refinery in the country to produce petroleum products for the country and the region.”
A group of pastoralists “reportedly invaded the Waraga-1 well site” operated by Tullow Oil Pty in Buseruka sub-county, Hoima District, according to the UK-based oil industry newsletter, Afroil. “A local Toonya [sic] official had expressed concerns about the recent increase in pastoralists settling around the well to access water and grazing lands,” the March 20, 2012 issue of the newsletter reports. “This comes amid accusations from local residents of encroachment by Tullow in the area, which has aggravated existing inter-communal land disputes.”
After a stormy, two-day special sitting of parliament, in which MP Gerald Karuhanga (Western Uganda representative for Youth) accused Prime Minister Amama Mbabazi, Foreign Affairs Minister Sam Kutesa and Internal Affairs Minister Hilary Onek of taking bribes to influence the award of oil exploration contracts, members pass a resolution calling on the named ministers to resign. MPs also voted for a moratorium on signing further oil contracts until laws have been passed to give effect to the 2008 National Oil and Gas policy. They also resolved to establish an ad hoc parliamentary committee to investigate the bribery allegations. Committee members are later named as Werikhe Kafabusa (Chair), Stephen Tashobya, Julius Njujura, Freedom Kwiyucwiny, Cecilia Ogwal, Hussein Kyanjo and Joseph Matte.
The USA passes the Dodd-Frank Wall Street Reform and Consumer Protection Act. One of the Act’s clauses requires all companies that are listed on US stock exchanges and/or registered with the US tax authorities, and that are involved in oil and minerals exploration and extraction, to make annual reports disclosing all payments that they or their subsidiaries have made to foreign governments. Transparency activists see this as a breakthrough because it could force the world’s major oil and mineral companies—most of which have representative offices in the USA—to publish what they pay. The Act’s actual implementation and implications, however, will depend on detailed, follow-up regulations.
Tullow and the Government of Uganda sign a memorandum of understanding to resolve the capital gains tax dispute over the sale of Heritage’s Ugandan assets to Tullow. Tullow pays the outstanding tax on Heritage’s behalf (and then sues Heritage to recover the money.) CNOOC and Total sign sale and purchase agreements with Tullow, agreeing to pay US$ 2.9 billion for interests of one third each in blocks 1 and 3A.
President Yoweri Museveni is returned to power in an election that opposition parties describe as fraudulent and that many international observers consider “flawed.”
Oil and gas finds: During the year, Tullow completes further successful appraisal drilling in Exploration Area 2 (northern Lake Albert), confirming oil and/or gas in 8 wells: Kasamene-2, Kasamene-3, Nzizi-3, Nsoga-2,Nsoga-5, Kigogole-2, Kigogole-4, Kigogole-5. In Exploration Area 1 (Pakwach), Heritage finds oil and gas in Ngiri-2 and Mpyo-1. Neptune drills a second test well in Exploration Area 5 (Rhino Camp Basin, West Nile), but it is dry. (PEPD)
UK consultants, Foster Wheeler, complete and submit to the government of Uganda a feasibility study, funded by the government of Norway, on the building of an oil refinery in Uganda. According to the study, a refinery project is economically viable: an investment of some USD 2 billion would bring a high rate of economic return, enabling Uganda to become self-sufficient in petrol, diesel and kerosene, while also exporting a surplus to Rwanda, Burundi and parts of Kenya, for a period of up to 30 years. The government of Uganda welcomes the report, as it greatly prefers the refinery option to exporting crude oil. Later, President Museveni is quoted by Reuters as saying “We should resist ferociously those parasites who want to give away this resource for ‘a morsel’ of food as did Esau in the Bible.”
A draft Petroleum (Exploration, Development, Production, and Value Addition) Bill is published for public review and comment. Uganda’s Civil Society Coalition on Oil (CSCO) says that the draft lacks sufficient checks and balances on ministerial control, and may lead to corruption.
Tullow asserts its pre-emptive right to buy the Heritage stake in Exploration Areas 1 and 3A on the same terms and conditions that Heritage has agreed with ENI. Tullow proposes to buy the Heritage stake and then sell on rights in the exploration areas to Total and the Chinese National Offshore Oil Corporation. However, the Uganda Revenue Authority bills Heritage for US$ 404 million in capital gains tax bill arising from the initial sale. Heritage disputes the amount charged, but the government refuses to approve the transactions until the account is settled.
Oil and gas finds: During the year, Tullow drills 8 exploration and appraisal wells in Exploration Area 2 (northern Lake Albert). Seven of these find oil and/or gas. These are: Mputa-5, Karuka-2, Ngassa-2, Nsoga-1, Kigogole-3,Wahrindi-1, Ngara-1. In Exploration Area 5 (Rhino Camp, West Nile), Neptune are not so lucky. Their first exploration well, Iti-1, is dry. (PEPD)
Heritage offers its 50 per cent stake in Exploration Areas 1 and 3A to Italian oil company ENI for a “cash consideration” of US$ 1.45 billion.
Ugandan environmental NGO, Greenwatch, and two Daily Monitor journalists file a case with the High Court under freedom of information laws and provisions in Uganda’s constitution, to require the government to make public the details of production sharing agreements (PSAs). Earlier in the year, the UK NGO, Platform, had published a report claiming that the PSAs were bad for Uganda because they allowed excessive profit-taking on the part of the oil companies.
Oil and gas finds: During the year, Tullow drills five exploration wells in Exploration Area 2 (northern Lake Albert), finding oil and/or gas in all of them. The wells are Taiti-1, Ngege-1, Karuka-1,Kasamene-1, Kigogole-1. Heritage is equally successful, finding oil and/or gas in four wells—Ngiri-1, Jobi-1, Rii-1—in Exploration Area 1 (Pakwach). Heritage also sinks two appraisal wells, Kingfisher-2/2A and Kingfisher 3/3A, in Exploration Area 3 (Semliki and southern Lake Albert), confirming oil and/or gas in both. (PEPD)
Uganda’s Civil Society on Coalition and Oil is established.
A National Oil and Gas Policy, drafted with Norwegian financial aid and technical support, is approved by Uganda’s Cabinet and adopted by the Ministry of Energy. It pledges to ensure that oil and gas development will “contribute to early achievement of poverty eradication and create lasting value to society” and promises “high standards of transparency and accountability in licensing, procurement, exploration, development and production operations as well as management of revenues from oil and gas.”
Oil and gas finds: In Exploration Area 2 (northern Lake Albert), Tullow drills three appraisal wells—Nzizi-1, Nzizi-2 and Mputa-3—and confirms oil and gas discoveries in all of them. In Exploration Area 3 (Semliki and southern Lake Albert), flow tests in Heritage’s Kingfisher well confirm commercially viable reserves. (PEPD)
Carl Nefdt, an expatriate geologist working surveying Lake Albert for Heritage, is shot dead in “a shoot-out between Ugandan and DRC forces.” (Kashambuzi, 2010). Presidents Museveni of Uganda and Kabila of DRC meet in Arusha, Tanzania, and sign a new agreement on cooperation in surveying and prospecting.
The government signs a production sharing agreement with Dominion Petroleum, giving them exploration rights over Exploration Area 4B (the northeast of Lake Edward and adjacent land to the south of the lake.)
Tullow buys Hardman Resources. This gives Tullow a 100 per cent stake in Exploration Area 2 (northern Lake Albert), together with a 50 per cent stake, through its earlier acquisition of Energy Africa, in Exploration Area 3 (southern Lake Albert and Semliki),
Oil and gas finds. This is a year of multiple finds, which finally confirm Uganda’s commercial oil potential. In Exploration Area 2 (northern Lake Albert), Hardman drills an exploration well, Waraga-1, which finds oil and gas. In the same Exploration Area, Tullow’s Mputa-2 well finds oil, and Nziz-1 finds oil and gas. In Exploration Area 3, Heritage’s Kingfisher-1 well discovers oil and gas.
Tullow and the government sign a memorandum of understanding agreeing to an “early production scheme.”
President Museveni convenes a “thanksgiving ceremony” for the discovery of oil.
Oil and gas finds: In a major exploration breakthrough, Hardman drills the Mputa-1 well, finding significant quantities of oil and gas in Exploration Area 2 (northern Lake Albert).
The government of Norway provides US$ 4.2 million for a Strengthening the State Administration of the Upstream Petroleum Subsector project. Its three main components support i) developing a policy and regulatory framework for petroleum, ii) institutional capacity building for PEPD, ii) support for technical and economic studies.
The government signs a production sharing agreement with Neptune Petroleum (Uganda) Ltd, a wholly owned subsidiary of UK-based Tower Resources, giving them exploration rights over Exploration Area 5 (Rhino Camp Basin, in the West Nile region at the northern end of the Albertine Graben).
Heritage is awarded a 50 percent working interest in Exploration Areas 1 (Pakwach) & 3A (southern Lake Albert and Semliki).
Tullow Oil PLC buys Energy Africa, taking over their 50 per cent stake in Exploration Areas 2 and 3.
Oil and gas finds: Heritage drills three wells in Exploration Area 3. These first of these, Turaco 1, finds methane but it is too heavily contaminated with carbon dioxide to be commercially viable. Turaco-2 and Turaco-3 show evidence of oil and gas deposits, but it is not clear whether these are viable for commercial production. (Kashambuzi, 2010; PEPD)
Heritage sells Energy Africa a 50 per cent stake in Exploration Area 3 (the Semliki basin and southern Lake Albert).
The government signs production sharing agreements with Australian company, Hardman Petroleum, and the UK-based Energy Africa, given them each a 50 per cent stake in exploration rights over Exploration Area 2 (northern Lake Albert).
Allied Democratic Forces rebels attack Kichwamba Technical College, within the Semliki area which Heritage is surveying. The rebels burn down dormitories and 80 students die in the conflagration.
Heritage conducts the first ever seismic survey in Uganda, in the area it is exploring. The data is “so good that it was no longer possible to ignore the potential that the Graben possessed.” (Kashambuzi, 2010)
The Commonwealth Secretariat meanwhile supports Petroleum Exploration and Development Department efforts to develop “model” production sharing agreements.
The government signs a production sharing agreement with Heritage Oil & Gas Ltd., which gains exploration rights over what is now defined as Exploration Area 3—covering the Semliki basin and the southern part of Lake Albert.
The government signs a production sharing agreement with a US company, Uganda Works and General Engineering Company, but “they could not meet any work obligations . . . the Minister was forced to cancel the licence in March, 1996.” (Kashambuzi, 2010).
PEPD is invited by the Society of Exploration Geophysics to again showcase the Albertine Graben in an international convention.
PEPD is invited to promote the Albertine Graben as a potential oil prospect at the American Association of Petroleum Geologists’ convention in Denver, Colorado. PEPD becomes a regular exhibitor at future AAPG conventions.
The government and Petrofina (a Belgian company that merged with Total in 1999) sign a production sharing agreement that gives Petrofina exploration rights over the entire Albertine Graben. The license expires in March 1993, “without the company completing its work programme obligations [under the PSA.]” The license is not renewed and Petrofina leaves Uganda. (Kashambuzi, 2010)
The governments of Uganda and Zaire sign an Agreement of Cooperation for the Exploration of Hydrocarbons and the Exploitation of Common Fields. This leads to negligible cooperation in practice. (Kashambuzi, 2010)
The Petroleum Unit is “largely devoted recruitment, training and the procurement of equipment, and very limited field work.” (Kashambuzi, 2010). In a capacity building drive, staff are sent for specialist training in the UK, Norway, the USA and India.
Yoweri Museveni comes to power in Uganda and “suspended all negotiations for licensing until some Ugandans were trained in petroleum matters to . . . negotiate agreements that were not disadvantageous to the country.” A group of government officials are sent to the UK to study petroleum geosciences. (Kashambuzi, 2010)
A Petroleum (Exploration and Production) Act is passed into law and a Petroleum Unit is established within the Geological Survey and Mines Department of the Government of Uganda.
The government establishes a Petroleum Exploration and Production Department (PEPD).
With funds loaned by the World Bank, the Government of Uganda undertakes aerial magnetic surveys of the Albertine Graben. These identify three major sub-basins deep enough for oil. In late 1984 a meeting is held in London to attract oil exploration companies, but draws little response because the aeromagnetic surveys are supported by only “scanty data . . . [on] . . . the geology and geophysics and seismology of Uganda.” (PEPD; Kashambuzi, 2010)
President Milton Obote is deposed by Idi Amin, who at first gives exploration rights to British companies, Kirkwall Associates and Collin Oil and Gas.
Milton Obote’s government gives Shell oil exploration rights. (Guweddeko, 2000)
Uganda becomes independent.
A Petroleum Act is passed by the colonial Legislative Council
The colonial government drills ten shallow wells for geological correlation purposes, but finds no indication of hydrocarbons.
The Johannesburg-based African-European Investment Company drills several test wells in the Semliki basin, and finds promising prospects in, especially, the Butiaba Waki B-1 well, drilled in 1938. (Kashambuzi, 2010; PEPD)
In order to advance its joint-venture with Anglo-Persian Oil, Uganda’s colonial government announces plans for an oil pipeline from Lake Albert to Wakiso, near Kampala. These plans are soon abandoned with the onset of the great depression. (Guweddeko, 2000)
The British government and Anglo-Persian Oil Company agree a joint venture project to prospect for and produce oil. (Guweddeko, 2000)
E. J. Wayland, Director of the Geological Survey of Uganda, re-confirms evidence of hydrocarbons, including oil and gas seeps, in the Albertine Graben. (PEPD)
Britain’s Crown Agents encourage three British companies—Britt & Sydney, Chijols Oil, and Grog & Tanner—to invest in oil exploration in Uganda but “there was no progress owing to financial constraints” (Guweddeko, 2000)
A British exploration team, headed by one A. W. Brittelbank, establishes a camp at the Kibiro oil seep. The exploration efforts are abandoned with the onset of World War I. (Guweddeko, 2000)
The newly established British colonial administration licenses the British East African Syndicate to prospect for oil. (Guweddeko, 2000)
Captain Frederick Lugard of the Imperial British East Africa Company travels to western Uganda to inspect reported surface oil seeps. The company declares ownership over the oil deposits. (Guweddeko, 2000)