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Bid rounds: Nigeria remains silent as Uganda woos investors for new oil blocks

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Election season over, Africa’s biggest oil producing country is still silent on its oil licensing round last held in 2007 while other oil-producing countries like Uganda plan to launch a second competitive bid round for exploration licenses in the Albertine Graben area where over 6.5 billion barrels of oil resources have already been discovered.

The hydrocarbon deposits discovered 12 years ago have been repeatedly delayed by a disagreement with oil companies over tax disputes, however Uganda will be offering oil exploration deal for the second time under open bidding, as a result of the success recorded from the first bid round.

According to Irene Muloni, Uganda’s Minister of Energy and Mineral Development, seven new exploration blocks will be open for bidding during the third week of May to coincide with the East African Community Petroleum Conference that is scheduled to take place in Mombasa, Kenya.

Five exploration blocks ranging from 400 to 1300 km2 are expected to be launched for this licensing. Extensive data is available on the blocks including seismic and well data. The licensing round follows the first licensing round through competitive bid which was successfully undertaken in 2017.

“The minimum requirements for bidders have not yet been stipulated by the ministry but will be revealed at the conference,” Muloni said in a press conference.

The area that is being put up for bid has three commercial areas that cover both onshore and offshore blocks include Ngaji in Kanungu and Rukungiri districts; Kasuruban in Buliisa and Packwach; Avivi in Arua district; Turaco in Ntoroko district; and Omuka in Nebbi district.

“We have so far allocated 10 percent of the Graben to the existing firms. From the remaining 90 percent of the Graben, we have picked data and it is this data that has helped us with the forming of these new blocks,” Muloni said.

France’s Total, China’s CNOOC and the UK’s Tullow are preparing a final investment decision this year for a $20 billion project to develop over 1.7 billion barrels of reserves in Uganda’s western Albertine Graben area near the border with the Democratic Republic of Congo.

The country is also planning to construct a 1,445 km crude export pipeline via Tanzania’s port Tanga and an oil refinery that is expected to produce finished products for the East African region.

Uganda launched its first competitive round in 2014 but the round failed to attract significant interest from larger oil companies. Completed in 2016, the round saw Armour Energy from Australia and Oranto Petroleum from Nigeria emerge as the top bidders for the Kanywataba area and Ngassa block respectively all in the Albertine Graben area.

Uganda made its first commercial oil discovery in 2006. To date, over 121 wells have been drilled with a success rate of over 88 percent.

In Nigeria, Stakeholders in oil and gas industry are still left guessing about when a major licensing round or at least a marginal fields bid round will be held amid a lull in exploration activities.

Luqman Agboola head of infrastructure at Sofidam Capital Limited does not expect any successful bid happening in Nigeria until the next five years as the country needs to clear a backlog of mess that have occurred in the sector in time past.

“When you look at the market the feeling is that the money is not there so who will bid for those fields?” Agboola asked.

Agboola noted that having the main aim for having bidding rounds is to make money and allow efficiency because oil blocks have gone beyond political patronage which occurred in time past.

Ayodele Oni, energy partner at Bloomfield Law Practice said the government loses a huge amount of revenue daily by not conducting a licensing bid round but this loss is not truly only accountable to the protraction in conducting a bid round.

“Nigeria has lost more from non-producing marginal field licenses which it has estimated could cumulatively produce an average of 90,000 bpd of crude,” Oni, energy partner at Bloomfield Law Practice said.

Oni noted that some of the factors for non-producing marginal field ranges from inappropriate due diligence to technical or financial challenges therefore it’s pertinent that these challenges are addressed before conducting another bid round.

Nigeria has the second largest proven reserves in Africa, with an estimated 37.5 billion barrels of crude oil deposits at the end of 2017, representing 2.2 per cent of the global total, according to the BP Statistical Review of World Energy 2018.

Oil remains the heartbeat and chief source of income for Africa’s biggest economy, accounting for a whopping 85 percent of export revenue, however in the last twelve years, Nigeria’s oil reserves and daily production had remained almost stagnant hovering in the region of 37 billion barrels and two million barrel production day (bpd) respectively, data from Organization of Petroleum Exporting Countries (OPEC) showed.

A 10-year target set by the Federal Government to boost crude oil reserves to 40 billion barrels and daily production to 4 million barrels by 2020 is becoming unrealistic as analysts say corruption and government shenanigans have decreased growth in the sector.

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