OIL and GAS Oranto to Have Majority Stake in Ngassa Oil Well

NOVEMBER, 2016 OIL AND GAS Oranto to have majority stake in Ngassa oil well Oranto Petroleum Limited is current- the Ngassa well to Oranto. ly negotiating with government for an Oranto and the Uganda government are exploration license for the Ngassa oil well, expected to sign an agreement by the a couple of months after the company second week. noted it was not comfortable with Ugan- The Ngassa oil well is said to have as da’s decision to award an equal stake in much potential as the giant Kingfisher the well with fellow Nigerian firm, Niger field that holds more than 500 million Delta Petroleum Resources, our sources barrels of oil. have told us. Oranto’s vast experience - it holds licens- In pushing out Niger Delta, Oranto has es in Nigeria, Ivory Coast and Namibia - is executed its first major boardroom coup no match for Niger Delta. and made a statement of intent of its In late July, Niger Delta Exploration plans in Uganda. & Production Plc, the parent company In August, the Uganda government, in of Niger Delta Petroleum Resources, completing the country’s first competi- announced that a funding exercise that tive round for oil blocks, awarded equal started in 2013, where the company exploration rights over the deep Ngassa sourced for $80 million from the issu- oil well, which is located on the banks ance of convertible loan notes, had been of Lake Albert, to both Oranto and Niger completed. Delta. However, Oranto protested on The Ngassa oil well requires substantial grounds that Niger Delta did not have the amounts of investment. Tullow Oil, the financial resources to invest in the explo- previous holder of the license over the ration of the well. well, wrote off an exploration bill of $67 According to our sources, the Uganda million in 2014 after the company con- government wrote to both companies, ceded that any further investment would assuring them that it had reconsidered not make business sense. its position and agreed to an 80 per cent At one point, Tullow Oil described the to 20 per cent stake in favour of Oranto. Ngassa well as one that had “the po- The government asked both companies tential to be the largest oil field in the to make comments over this change in basin...” ownership. However, we have been told The Ngassa-2 is a deviated well with a that Niger Delta did not respond to the total depth of 3,392 metres beneath Lake changes within the agreed time frame, Albert. The well has the features of the prompting government to consider Kingfisher, which is operated by Chinese awarding full ownership of the license to firm Cnooc. OIL AND GAS Land acquisition takes shape as talks over oil pipeline intensify Throughout the month of No- Montrose, drew up for one of the with more registered rights and in- vember, the ministry of Energy and oil companies last year. terests,” the civil society writes in Mineral Development, together The draft framework will be the its joint submission. with the three main oil companies first time that the three oil compa- The Land Acquisition and Reset- – Total E&P, Tullow Oil and Cnooc - nies have undertaken a joint land tlement Framework comes after held numerous consultations over acquisition plan even though their government has identified the the draft Land Acquisition and Re- areas of operation have distinct route for a 1,445km long and 24- settlement Framework as Uganda features. Access to land for differ- inch diameter heated crude export tries to have a clearer plan on ac- ent oil-related infrastructure such pipeline to the Tanzanian port of quiring land for oil-related infra- as central processing facilities, in- Tanga. Tanzania is yet to finalise structure and managing expecta- ternal pipelines, terminals, among with its route though. tion. others, is seen as one of the most On December 1, the govern- The framework is expected to of- contentious issue that oil compa- ments of Uganda and Tanzania fer ways of avoiding some of the nies have to deal with. awarded a contract for the Front pitfalls that government found it- A number of civil society organi- End Engineering Design, with the self in while acquiring land for the zations like Global Rights Alert have study expected by December 2017. refinery. Throughout the process already raised their concerns over Different committees compris- of acquiring land for the refinery, the draft framework to the oil coming government officials of Ugan- speculators bought land on the panies, with one of their key con- da and Tanzania meet every four cheap and sold it on the high; iden- cerns being how the acquisition of months to assess the progress of tification of the tenants was prob- customary land will be done. the project. lematic; the valuation of the land “The peculiarities of customary Uganda and Tanzania are cur- was disputed; while some people tenure compared to other tenures rently negotiating an intergov- hated the areas they were relocat- require that special tools/proce- ernmental agreement that will be ed to. dures need to be adopted in its scrutinised by Parliament. The two Some of the sections of the re- acquisition to mitigate or avoid hu- governments are also holding dis- port are expected to borrow from man rights violations that may re- cussions over a harmonised fiscal a set of guidance documents on sult from treating the customary as regime. land acquisition that British firm, if it was just like the other tenures Uganda starts new search for refinery investor Government has received interest from more than 25 companies willing to partner with it in developing a refinery, Parliament heard recently. The government said it intends to choose a partner with whom it can share the cost of put- ting up a $4 billion refinery by June 2017. Kenya confirmed that it will take a 2.5 per cent stake in the refinery, while Tanzania is consider- ing a shareholding of eight per cent. Our sources say French firm Total E&P is also mulling over the idea of taking up a stake in the refinery, with some saying as much as 10 per cent. Speculation that Chinese firm Cnooc could also invest in the refinery are unfounded with our in- dustry sources telling us they are not interested. One of the sticky points that investors will ne- gotiate for is a guarantee of crude oil supplies to the refinery as the other oil companies push for oil resources for the pipeline. ELECTRICITY Karuma completes excavations as steel, cement firms eye deals In the first week of December, China’s ma HPP, met with managers of Roofings House Entebbe, also in November, to Sinohydro Corporation Limited, together to brainstorm on how Ugandan-made discuss the issue of other local materi- with a team of experts and supervisions, products can be supplied towards the als being supplied towards the Standard will carry out durability test runs, to de- construction of the 600MW power plant. Gauge Railway and the Karuma HPP. The termine whether cracks will reappear in Roofings Limited, the largest producer meeting had trouble coming up with some of the structures it has built at the of steel in Uganda, will have to find ways what defines ‘local content’ and whether Karuma hydropower project. The test of reducing its prices in order to supply every company operating within the East runs could last a week or more. products to Karuma hydro power project. African Community should be given op- The power dam contractors have re- Nearly all the steel at the project site portunity in the spirit of integration. ceived a lot of criticism for the cracks that was imported from China, where the Already, Hima Cement Limited, Tororo appeared at the dam, which, according to price remains lower compared to that on Cement Limited and Kampala Cement investigations, were partly a result of the the local market. Limited have been cleared to supply ce- high temperatures within the mixture of According to Albert Byaruhanga, the ment to Karuma HPP after Savannah Ce- cement. project manager of Karuma hydro pow- ment of Kenya was stripped of its monop- Wang Yantao, the executive vice presi- er project, a tonne of steel from China is oly of being the only supplier of cement. dent for Sinohydro in East and Southern cheaper by $100. Construction of Karuma HPP, which Africa, has been in Uganda for more than Roofings officials said at that meeting is about 40 per cent complete, is set to a month, and has promised to stay around that they were ready to have their prod- embark on the next stage of concreting until the cracks have been dealt with and ucts subjected to any quality test. It’s the – where cement will be needed – after the project resumes on the right course. price and fluctuations in the foreign -ex excavation works, which had a 26km tun- In late November, officials of the Uganda change market that remain a challenge nelling, were completed. The project is Electricity Generation Company Limited, for Roofings Limited. set for commissioning in December 2018. the supervisors of the $1.7 billion Karu- Another meeting was held at State ELECTRICITY ERA courts consumers as release of annual tariff draws closer The Electricity Regulatory Authority in dollars. Also, save for Kilembe money to the Uganda government, spent much of November on a charm Mines Limited, all the power purchase part of which will be used to pay for offensive of different consumers of agreements are priced in dollars. consultancy services for ‘Cost of Ser- power as it prepared for a showdown Power purchase costs contribute at vice and Affordability of Tariff Studies.’ of public debate on the tariffs – a key least 60 per cent to the overall tariff, ERA says: “The overall objective of the component in calculating the cost of according to ERA figures.

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