COVID-19 is not only claiming lives, but also paralyzing businesses in Uganda and beyond. In Uganda, the oil and gas sector can only celebrate once the Government declares the country coronavirus-free.
The energy ministry has extended deadlines for the second licensing round to September 30, 2020. The decision, according to the ministry, was reached following the outbreak. The development was confirmed by Frank Mugisha, the manager of the Second Licensing Round at the energy ministry.
In a telephone interview, he said: “Due to COVID-19, we have again extended the date for submission of applications in the prequalification stage to September 30. “COVID-19 has significantly affected the oil industry in all aspects and the crude oil price is now less than $30 per barrel.” Mugisha said the target investors cannot bid for oil blocks around the world at the moment.
In addition, he said, the leading oil and gas companies across the world are not making investments to stabilise their financial flows during the hard times. “We cannot tell when the situation will normalise and, therefore, companies cannot make commitments,” he said.
Between now and September, Mugisha is optimistic that activities will have normalised and that many companies will be ready to bid for the oil blocks. “Again, most countries have either extended or cancelled their bidding rounds,” he said.
James Muhindo, the national co-ordinator at the Civil Society Coalition on Oil and Gas (CSCO), said extending the deadlines is needed given the current situation. “The oil and gas sector will be affected. Investors cannot commit funds at the moment. Internationally, companies are downsizing to keep afloat due to the coronavirus,” he said.
This will not be the first time the deadline for the second licensing round is moved. The target was 2019 and later moved to March 2020 and now September. This also implies that the targeted deadlines for signing production sharing agreements and exploration licences for successful firms will be moved.
Earlier, the energy ministry had set December 2020 as the time to conclude processes under the round. According to a recent status report, just six international and local oil and gas companies had expressed interest. The above, the report noted, are those that applied through joint venture partners for explorations.
As part of local content boost, he said the Government was recommending joint venture partnerships for local companies to develop capacity. “Oil and gas explorations are capital intensive. Local entities may not have the needed technology and finances to undertake these operations, so we recommend joint venture partnerships,” he said.
The Government has, to date, awarded nine production licences. In 2012, the Government awarded a Petroleum Production Licensce (PL) over the Kingfisher field to China National Offshore Oil Corporation (CNOOC).
In 2016, five production licences over Mputa-Nzizi-Waraga, Kasamene-Wahrindi, Kigogole- Ngara, Nsoga, Ngege oil fields were awarded to Tullow. In the same year, three other production licences were awarded over Ngiri, Jobi-Rii and Gunya oil fields to Total E&P.
According to Mugisha, the confirmation of commercial oil reserves in the country and production licences are the basis for the planned development, production, and commercialisation of oil and gas and the ongoing infrastructure developments such as roads, Kabaale International Airport, and industrial parks.