Uganda Commences Oil Drilling: How We Got Here

Uganda’s 100-year journey towards the global oil club membership finally took what is dubbed the last step, the start of drilling. The process commissioned by President Yoweri Museveni will see the Chinese company, Cnooc Uganda Ltd drill three wells initially, in Kikuube District in the southern part of the Lake Albert showers.   

The presence of oil deposits in Uganda was first confirmed in the 1920s when the British colonial government decided to confirm claims by the locals of a laminating substance near the lake. Early records show that the people of Kibiro, now in Hoima District, and surrounding areas in the Lake Albert basin, were already using the crude that was seeping from the ground. 

A British Geologist E. J Wayland made some exploratory adventures and noted that there was a high potential for the existence of hydrocarbons in the surrounding areas. However, the exploration activities were abandoned when the Second World War broke out in the 1940s, and after the war, it was recorded that the colonial government abandoned the oil activities altogether and decided to zone East Africa as an agricultural area. 

By then, the first shallow wells had been drilled by the African – European Investment Company, and another one, a deep well at “Waki B-1” was drilled in 1938 in Butiaba, present-day Buliisa district. Records show that as many as 20 wells were then drilled by the British government. 

President Godfrey Binaisa, who reigned briefly between 1979 and 1980 vowed that his government would exploit the resources in the Albertine basin in the Bunyoro region. 

However, he was toppled less than a year later, and the subsequent start of the five-year war in 1981 ensued. According to the Directorate Petroleum, “serious exploration work commenced again in the early 1980s with the acquisition of aeromagnetic data across the entire Graben and the subsequent follow-up ground geophysical and geological work in the late 1980s and 1990s.” 

Records at the petroleum department show that in 1983, the government acquired 9,578 line km of aeromagnetic data that identified three deposit centers along the entire length of the Graben. In 1985, the Petroleum Exploration Project was established to acquire more data on the resource and during that year, the first law, the Petroleum (Exploration and Production) Act was enacted, but political instability ended with the overthrow of President Milton Obote and then Tito Okello Lutwa, delayed the progress. 

According to former Permanent Secretary in the Ministry of Energy and Mineral Development, Fred Kabagambe-Kaliisa, a group of people approached President Museveni in 1986, just a few weeks after he took over power to sign agreements, which he reportedly rejected. Kaliisa, then a junior official in the ministry, says President Museveni sent him and other officials in the ministry for studies on the oil and gas industry.  

Upon his return, documentation of the plan to prepare to invite exploration companies commenced, and the first seismic data was acquired in the Graben in 1998. In 1990, Uganda signed a Cooperation Agreement between Uganda with the Democratic Republic of Congo (DRC) for Joint Exploration and Development of Common fields. 

The First Production Sharing Agreement (PSA) between Petrofina Exploration Uganda and Government was signed in 1992, over the entire Albertine Graben, according to Ernest Rubondo, the current Chief Executive at the Petroleum Authority of Uganda. 

The petroleum department in the Geological Survey and Mines Department of the Ministry of Energy was transformed into the Petroleum Exploration and Production Department (PEPD), to concentrate on petroleum exploration. 

Petrofina’s license which is not renewed and in 1997 Exploration Area 3 in the (Semliki Basin), was licensed to Heritage Oil and Gas Limited in partnership with Energy Africa, he says. 

And in 2001 Hardman Resources and Energy Africa, which later became Tullow Oil was licensed for Exploration Area 2, which is the northern part of the Lake Albert Basin. 

Tullow entered into three Ugandan exploration licenses in 2004 following the acquisition of Energy Africa. In 2006, Tullow began to get encouraging exploration results and flow tests from some initial wells. In 2006, the first kingfisher exploration well was drilled and oil was discovered, the second discovery, Rubondo says. 

In 2007, Dominion Petroleum was licensed to Exploration Area 4B in the Lake Edward-George Basin. In 2008, the cabinet approved the National Oil and Gas Policy for Uganda, and the increased activities led to a reported discovery of 6.5 billion barrels of crude, 1.7 billion of which are recoverable.  

Both Dominion and Neptune, which had been licensed in 2007 exited after hitting dry wells. In 2012, Tullow Oil farmed down an agreement with TotalEnergies EP Uganda and CNOOC Uganda Limited in which they each acquired a 33.3% interest in the Lake, and in 2020, Tullow agreed to sell its entire interest to Total for 575m USD in cash and post first oil contingent payments. 

This transaction was delayed when Heritage Oil refused to pay a Capital Gains Tax to the government, the legal process lasted for five years, and the Government was allowed to recover the 404 million dollars from the company. Tullow had originally struck a deal with Total for a farm-down to Total at US$900 million. 

But the deal collapsed after the government insisted that Tullow pays $167 million before it could transfer its assets to Total and CNOOC.  After two years of a standoff, Tullow Oil PLC the Parent Company of Tullow Uganda terminated the planned farm down, further delaying the road to production. 

In 2020, Tullow announce that the sale of its assets in Uganda to Total was completed for a total of 575 million dollars, with the 75 million due to be paid after the Final Investment Decision. It was reported that Uganda got a paltry 14.6 million dollars after earlier rejecting 167 million. It had stood ground earlier that Tullow was supposed to pay double the amount. 

In 2022, the Final Investment Decision on the Tilenga and Kingfisher oil development projects was made and the companies promised to start drilling for oil within two years. On Tuesday, Cnooc fulfilled this pledge and TotalEnergies is on course to start later this year, as the assembling of ridges goes on. After drilling the wells, the amount of oil in each well will be confirmed and the wells sealed, awaiting the completion of the Central Processing Facility and the pipeline of the refinery, whichever comes earlier. 

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