Nigeria's Oranto Enters Uganda Oil Sector

3637 Views Kampala, Uganda

In short
The Uganda Oil and Gas sector is set for a new wave of activities as government begins granting oil exploration licenses to international oil companies.

The Uganda Oil and Gas sector is set for a new wave of activities as government begins granting oil exploration licenses to international oil companies.
 
The Albertine Graben is divided into nine exploration blocks, five of which are already licensed to Tullow, CNOOC, and Total E&P. The Energy and Mineral Development Ministry was expected to sign Production Sharing Agreements (PSAs) and grant Petroleum Exploration Licenses to oil exploration companies that made it through the competitive bidding at the end of April, but the date was extended to pave way for more negotiations.
 
Four international oil companies have been waiting to be granted exploration licenses in order to begin fresh exploration activities that will be conducted under the new Petroleum (Exploration, Production Development) Act. They include Australia's Armour Energy Limited, WalterSmithPetroman Oil Limited, Oranto Petroleum International Ltd (Nigeria) and Niger Delta Petroleum Resources Ltd from Nigeria.
 
On Wednesday, Dr. Stephen Robert Isabalija, the Energy Ministry Permanent Secretary issued a statement indicating that Energy Minister Irene Muloni was to sign and issue an exploration license to Nigeria's Oranto Petroleum International Ltd for the Ngassa Shallow Play and Ngassa Deep play contract areas.
 
The signing ceremony was expected to take place in the Energy Ministry boardroom, but was called off abruptly. Yusuf Masaba, the Energy Ministry Communication Specialist, didn't give reasons for calling off the signing but said another date would be communicated.
 
Who is Oranto Petroleum International Ltd?
 
Information obtained online shows that Oranto Petroleum International Ltd is chaired by Nigerian tycoon, Prince Arthur Eze. In March this year, Oranto Petroleum International Ltd announced that it was investing 500 million US Dollars to develop South Sudan's Block B3. 
The company has significant upstream operations in Nigeria, Sierra Leone, Togo, Ivory Coast, Liberia, Chad, Cameroon and Equatorial Guinea.  In August 2015, Global Witness published a press release raising questions about Oranto Petroleum and Glint Energy after the Energy Ministry announced them as part of the successful bidders.
 
George Boden, the Global Witness Team Leader in Uganda first questioned the fact that the two companies were to explore oil in environmentally protected areas including the Virunga World Heritage site. "The Virunga area is one of the most bio-diverse on earth. Oil drilling here would be a disaster for the people and animals that depend on it. Uganda and Congo should make a deal with UNESCO to protect Virunga from oil activities," said Boden.
 
Global Witness also said in 2007, Oranto's Chairman, Prince Arthur Eze, authorised the payment of 1,500 US dollars to Liberian Parliamentary officials, which was deemed by the Liberian Auditor General to be a bribe to secure an oil contract. Other reports say Oranto has been cited in irregular deals in, which it has been involved mainly as a middleman. It is alleged that the company has a habit of securing oil deals for big oil companies to whom it sells its exploration rights later on.
 
A 2006 report by the Liberian Auditing Commission named the company in a bribery scandal as it aimed to unduly influence members of parliament tasked with ratifying oil and gas concessions. Oranto had already planned to sell rights to the concessions to another firm and was using bribes to expedite the governmental process, according to the report. In Mali, Oranto saw its exploration contract cancelled in 2014 as part of 12 exploration agreements that were cancelled over "various offences".
 
The controversy aside, the government of Uganda seems resolved to issue exploration licenses to Oranto and others waiting now that the Uganda National Oil Company (UNOC) is in place. The Government, through UNOC, as its nominee, will have participating interest in all the production licenses at a level of 15% as provided for in the respective Production Sharing Agreements.
 
The Oxford Institute for Energy Studies in May this year predicated a boom for the Oil and Gas Sector in Uganda and East Africa. It said Oil finds in Uganda were some of the largest onshore discoveries on the continent in over two decades. Since the initial 2006 discovery, however, Uganda has struggled to reach first oil.
 
The report said the acrimonious relationship between international oil companies and the Ugandan government, mostly over tax and contractual disputes, slowed development for several years.
 
The report further says the resolutions of the disputes between government and oil companies in 2014 established a foundation for a strong consensus around exploiting the majority of Uganda's oil.