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Home » Analysis and reports » Oil Exploration; Major firms ignore Uganda, rush for Mozambican oil fields

Oil Exploration; Major firms ignore Uganda, rush for Mozambican oil fields

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exxon4Mozambique announced closure of the Fifth Licensing round of 15 blocks with hydrocarbon potential in the offshore areas of Rovuma, Zambezi and Angoche, and the onshore areas of Pande-Temane and Palmeira on July 30, 2015.

Following a call for applicants that commenced in October 2014, the nation emerged from the Request for application  process with seven successful applicants, from which, ‘Majors; Shell, ENI, TOTAL, Russian giant Gazprom and the world’s largest private oil company ExxonMobil featured.

Information from Mozambique’s National Petroleum Institute (INP), which issued the call for application indicate that Rosneft teamed up with ExxonMobil to file joint bids.

Even as this very competitive round moves to the next stage, the INP using an evaluation  criteria which include the Health Safety and Environmental (HSE), the financial strength, technical competence and capability and national Economic terms, Mozambique is still at indecision on which company to take and which to drop. All applicants will no doubt surpass this criteria.

This rush for Mozambican fields by international major industrial players has not sent critical observers of Uganda’s budding oil industry to sleep.

When Uganda issued a Notice of Request for Qualification (RfQ) for the first licencing round on February 25, 2015 for six blocks in the Albertine Graben, out of the nineteen firms which responded and only Seventeen qualified for the evaluation process from which sixteen have been listed for the next stage.

Speaking at the announcement of the closure of the request of application Dr F. A. Kabagambe-Kaliisa, Permanent Secretary, Ministry of Energy and Mineral Development noted the registration of Seventeen valid applications presents a significant milestone given the several challenges the entire oil and gas industry is going through.

In a provocative article, the observer news paper, rubbished Kalisa’s confidence in the licencing proceeds noting that the list of applicants is not convincing enough to depict a sector on the move.

The paper noted that the presence of  junior firms list reveals one glaring reality: Uganda has failed to attract a major company into its oil industry.

“By most measures, all the companies that have expressed interest are what one would call junior firms, which are more willing to take risks with exploring for oil in wildcat wells. Many of the firms are from Nigeria, South Africa, United Arab Emirates (EAE), and USA” the paper provoked.

In response to this assertions, the principle petroleum officer at the Directorate of Petroleum Uganda Peninah Aheebwa said the absence of Majors in the industry is not a threat to the industry. According to Aheebwa, the door will be open for farm-downs in the near future.

“The aspect of small to mid-sized companies undertaking exploration and subsequently being replaced by large oil companies is an established process in the oil and gas industry worldwide” Peninah Defended

Although South Africa based Sasol, known as the African giant featured on the list of successful applicants after  evaluation, eye brows were raised when British based offshore firm Tullow expressed interest on the block offers while its other partners in Uganda including Total and CNOOC went mum.

According to Extractive sector governance expert Angelo Izama, the Majors are still counting stakes in the nation’s oil sector.

Izama in a blog post notes that the current political environment in Uganda, backed the by the fall of global oil prices  collectively present a risky investment environment for the super majors in Uganda.

“The election right now is looking pretty shaky with competition appearing on a more violent path early in the game. As the price of crude it has not recovered robustly at all,” Izama Observed

“Oil majors have the door open through future farm downs which will now be refereed by the Final Investment Decision of the present consortium of oil companies, including two majors (Total and CNOOC) on production” he blogged.

However, Ambrose Don Akampurira, an Oil and Gas analyst with AH Consultants LTD says the Mozambican fields, together with the newly discovered deposits in its neighbor Tanzania, and the huge deposits in Angola post a better investment attraction for the super majors compared to Landlocked Uganda.

“Mozambique’s offshore huge gas deposits, coupled with recent discoveries in Tanzania and commissioning of an LNG facility in Angola makes it profitable venture” he Observed.

Akampurira told Uganda Oil  in an exclusive conversation that Uganda and her immediate oil partner state Kenya need capitalize on the Lamu Crude Market Project, to make their own industry lucrative for the Majors.

“The primary concern for Uganda in particular and East Africa as a whole should be developing a holistic approach to Economic diversification using revenues from crude oil” he said.

“The majors will definitely get into mix when the infrastructure is place, he added”

Uganda and Kenya are currently working on a joint 1,380-kilometre Crude Oil pipeline which will run from the Albertine graben in Uganda  through Lokichar basin in Northern Kenya to the coastal town of Lamu. The Pipeline is expected to serve both countries including South Sudan and Ethiopia in the Norther Corridor arrangement.

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