Africa Energy Intelligence: Kampala hasn’t chosen the best time to offer new acreage

Although Uganda’s energy ministry has failed to offer a single new exploration licence since 2007, Ernest Rubondo, boss of the Petroleum Exploration & Production Department (PEPD) is to showcase six new blocks at the 7th East African Pettroleum Conference & Exhibition to be held in Kigali between March 4-6.

Energy minister Irene Muloni hopes to complete the bidding process for the sale of the permits around Lake Albert -Ngassa, Taital Karuka, Ngaji, Turaco and Kanywantaba- before the end of the year. But it could well prove an uphill struggle in view of a number of poor omens.

Uganda’s oil – some 1.7 billion barrels have already been identified – is very viscus and heavy and thus requires a major refining effort. In addition, if the oil is to be carried by pipeline it must be heated to avoid solidifying. Production costs are relatively high because it necessitates drilling a large number of wells and the oil must be exported by pipeline to Kenya.

Lastly, Ugandan oil will have to be sold below market prices in the first years because potential buyers don’t know its proprieties. All these handicaps, when combined with a highly depressed market and the prospect of low prices for some time, makes Uganda a fairly high risk prospect for investors.